Research/Analysis 2 - Bankruptcy Essay example
Also, customers who seek bankruptcy protection may be viewed as at-risk. In addition to reducing the length of contracts with at-risk customers, a business can require a deposit. For example, the attorneys at Metz, Lewis, Brodman, Must, and O’Keefe advise that if customers do not agree to 20 day payment terms, a deposit equal to the value of approximately 40-60 days of goods supplied could be required. The customer would then be invoiced for the amount needed to replenish the deposit account each month.
A third method a business can use to protect themselves from customer or client bankruptcy is purchase money security interest agreements. These agreements, once signed by financially distressed customers, give a company a security interest in all products sold to the customer, as well as proceeds from the sales of such products. Appropriate notice must be given to other secured creditor if the agreement is in fact signed (MetzLewis.com, 2008).
In the event that a business is faced with a debtor who has filed for bankruptcy, the business then needs to determine their next course of action. If the business is already attempting to collect on the balance and has…