When a business experiences a downfall due to market changes, it is natural to question if any outstanding invoices can still be collected. It is a common understanding that companies file for bankruptcy when the costs of continuing operations outweigh the benefits.
How Can Bankruptcy Affect Your Chances of Recovering Debt?
You learn that the client is bankrupt when you still owe them money. Can you still get your money back now?
Before we look more closely at this circumstance, you must take the initiative to try to recover a debt in the first place. This is why.
It will be more difficult for you, or even an in-house debt collection agency, to attempt to recover a debt the longer you wait for an invoice to go unpaid. According to research from the industry, the likelihood of collecting debt drops by more than 1% for each week that goes by.
Increase the rigor of your internal collection procedures. Examine any agreements you may have already signed with clients to determine if your payment terms and conditions have been spelled out in detail. You and your client should understand that any past-due payments will result in action from your business and, eventually, from a debt collection agency.
Different Types of Bankruptcy
There are many ways a company can deal with financial woes and difficulties. Learn more about this so you know how to go about recovering debt.
Creditors are almost always involved when a business chooses external administration.
Anyone or any firm that the company owes money to, who has supplied goods and services to, and who has granted loans to the company might be considered a creditor. In addition, when their wages are not paid, employees of the company are regarded as debtors.
There are primarily two categories of creditors:
A person who has the authority to obtain an asset from the business (for example, in a mortgage, it would be the house)
A person who is unable to claim any kind of asset Typically, a company that offers both products and services fits into this category.
According to the law, secured creditors typically receive payment before unsecured debtors. This occurs only when the business has the resources to pay back its creditors.
A company’s board of directors or its creditors both have the power to put it into administration.
An impartial, suitably qualified person is appointed to lead the company in order to address any issues and aid in its survival. It is the administrator’s duty to inform creditors of the company’s business, assets, affairs, and financial situation. Additionally, it is the administrator’s responsibility to notify the Securities and Investments Commission of any misconduct or crimes committed by the company’s employees.
A secured creditor or, in some situations, the court appoints a receiver when a corporation enters receivership. The assets of the corporation are under the receiver’s management in whole or in part.
It is the receiver’s duty to gather and sell assets to satisfy any outstanding debt to secured creditors and disclose any violations to the LAWS. In addition, the receiver is required by law to pay off any debts in the prescribed order of importance.
When a secured creditor or the court chooses a liquidator, the company is in liquidation.
The primary duty of a liquidator is to safeguard all assets and ensure that they are sold to support creditors.
What Can a Third-Party Debt Collection Agency Do?
Any unpaid debt owed to a business that has declared bankruptcy may be recovered with the aid of a debt collection agency. To speed up the recovery procedure, providing as much information as possible about the company is crucial.
An agency might investigate the company in question further and, among other things, check to discover if it has been involved in any legal disputes. Such elements will be taken into account, and the agency will swiftly inform you if it is worthwhile to attempt debt collection.
A debt collection service works on a case-by-case basis, so how quickly you ask for their help and how much information you can give them will determine how effective they are.
A reputed third-party debt collection agency has a team of legal staff that supports them as they chase debts on their client’s behalf. Additionally, they also have a “no collection, no charge” policy. Their experience in the business is a tribute to their commitment to providing all of their clients with dependable partnerships and top-notch service. Get in touch with a debt collection agency for further details.