Last November, ACA International published an article stating that bankruptcy rates were on the rise in the month of October after seeing a slight decline in the previous month. Any business that extends credit to its clients should take this rise very seriously and be prepared to deal with the first-hand consequences of those increased bankruptcies.

With bankruptcy on the rise across the country, it is more and more likely that one or more of your clients could be entertaining the idea of filing themselves. In order to prepare your business for that possibility, it is important to have a plan in place to handle those situations when they arise.

  • Understand the Situation

The first step in dealing with an account that is considering filing for bankruptcy is to attempt to get a better understanding of the situation that business or person finds themselves in.

Try to gauge where the amount owed to you falls in comparison to the rest of their outstanding debt. This will give you a strong feeling for just how likely they are to respond to any offers to renegotiate the outstanding balance and repayment terms.

  • Maintain Communication

Of course, the best way to understand any situation that your clients might be going through is to have open lines of communication with them. This could mean speaking to them in person, talking over the phone, shooting them a text message, or even contacting them through social media channels.

The more time you invest communicating with your clients, the more likely you are going to be to establish a strong relationship with them. And the stronger the relationship, the better chance that you can either help them avoid filing for bankruptcy or get yourself at the top of the list of outstanding debts when they do.

  • Offer Alternative Options

If the amount owed to you is one of the larger amounts causing a client to consider filing for bankruptcy, you might be better served to offer to renegotiate the terms of that debt instead of losing out to bankruptcy.

In many cases, clients are simply struggling due to seasonal issues or temporary problems. Giving them time to work out those issues can often save a business, and in turn ensure that you are repaid in full down the road.

  • Document Everything

When the client does commit to filing for bankruptcy, you are definitely going to want to make sure that you have all of your ducks in a row in terms of documenting the outstanding debt.

Filing bankruptcy can be an extremely detailed process, and making sure that you have all of the evidence to document the exact amount owed to you is critical.

  • Remain Firm

No matter how close you are with the client, you always want to remain firm that you expect to be compensated for the product or services that you have already provided. So while it is important to be flexible and understanding, don’t allow anyone to misunderstand that you expect to be paid.

Dealing with bankruptcy is always tricky, but it is important to remember that the clients you are working with almost certainly want to avoid taking that step. In that respect, you are likely on the same side. So working together to solve their problems beforehand is always the best step.