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  • Mar 24th, 2022 12:13 pm
Sep 15, 2018
47 posts

bankruptcy client

Hello, I have small in home business corporation, that I build sites, so I build a site for a client of me that went very good and he paid me right away. then he said he likes to expand his business, so I did more work for him. then I sent invoice to him he never get back to me, then he texted me and said he closed his business.

Can I claim the amount of the invoice as a lose? or just forgot that and move on?
I spent days and nights to complete his job almost one full month 8 hours a day.

I use quick book cash based accounting, as most of my clients do not pay on time.

Please advise, as this really hurts my small business.

Thank you,
4 replies
Deal Addict
Dec 17, 2009
1487 posts
Have you file a small claim yet?
If he just closed his business, as a director, he may still responsible for the debt.
It takes time, long time, but worth to try.
If he filed bankruptcy, you have less chance to get the money back, but you may still get a small monthly payment.
Deal Addict
Dec 27, 2007
4447 posts
If you actually did that much work ( 1 month 8 hours per day) why didn’t you sign a contract where you get paid by milestones?

Just makes no sense to do that much without a lien or anything you can do, at worst with milestones you would get partial pay or would stop sooner than the 1 month mark
warming up the earth 1 gas fill-up at a time...
You only live once, get a v8
Jul 31, 2017
420 posts
You can write off the invoice as a bad debt and transfer it from your AR to your sales expenses. That takes care of the accounting side of it. Equally as important is you tightening up your procedures to avoid getting screwed over again. If most of your clients don't pay on time, you might want to revisit how you bill, collect and obtain clients!
Deal Fanatic
Sep 23, 2007
5500 posts
On the accounting side you can choose to write it off as bad debt. If you recognized the sales in a previous tax year then you would be adding to your bad debt expense this year such that your net income is lower by the amount the client was supposed to pay you.

If your client operated as a corporation then most likely it's a lost cause to chase him. You can certainly try. My understanding of law is that the corporate veil cannot be pierced unless there's an illegal act. If he went bankrupt due to external circumstances (market conditions for example), you have no case. If he went on to create another corporation to continue his business, then he is intentionally trying to dodge the payment (and possibly other vendors too), then you have a case, assuming you have a way to prove it.

I echo what others said about getting an initial payment and then milestone payments. This way the most you lose is the last payment. If someone doesn't agree to milestone payments, that's a red flag for sure.


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