What to do when customers go bankrupt? Is it worth it?

What to do when customers go bankrupt?

Your goods have been shipped, the service provided, the invoice issued, but nothing happens. Your customer is not budging, various payment deadlines have passed and the case may have been with your debt collection partner for some time. You've already guessed it: your customer seems to be going bankrupt. And finally it happens. 

Whether it is worthwhile for you to assert your claims in your customer's insolvency proceedings and which criteria you should weigh up in this interview with an insolvency expert.

FTJ: From what amount is it worth filing a claim in insolvency proceedings?

Expert: In principle, you can file any claim. Insolvency proceedings are a procedural effort in which you can make a lot of mistakes as a layperson. Then the effort involved is no longer in proportion to the benefit. In the worst case, the registered claim will be rejected and you will be left empty-handed. To make it worthwhile, I recommend an amount of at least 2,000 euros. 

FTJ: So there are a lot of hurdles in insolvency proceedings - how can you do it right as a creditor?

Expert: In most cases, insolvency law is not part of your company's core business. I know from two decades of experience that it is better to get help. The claim must first be properly registered in the insolvency table. If the reason for the claim is unclear, the claim can be disputed and then it usually becomes more complicated. A registered claim in the insolvency proceedings can be disputed by the insolvency administrator, the debtor and the other creditors. This can go as far as an action for declaratory judgment. Of course, deadlines must be observed in all of this, and failure to meet them can also be expensive. So if you file your claim too late for the insolvency table, you will also incur a fee.

FTJ: Who supports me as a creditor in insolvency proceedings and how?

Expert: In the B2C sector, as a creditor you usually find out from a debt counseling service that the customer is planning to file for insolvency. Insolvency law stipulates that the debtor must first attempt to reach an out-of-court settlement with all of their creditors. This is often mandatory and the attempt fails. Only then can the debtor file for personal insolvency. And this is when it becomes really important that the creditor asserts his claim correctly. It is therefore best to have a specialist on hand beforehand. This can be a lawyer or a debt collection service provider. From experience, I recommend the latter.

Expert: As a rule, the debt collection partner has been in contact with the debtor for some time, receives all the information in good time and knows what needs to be done. Communication is professional in all directions. It is important to communicate with debtor advisory services, courts, insolvency administrators and the debtor themselves and to strike the right tone in each case - this is simply the core competence of debt collection companies. In addition, debt collection service providers have legal expertise and can assist you when the question arises: do we go to the effort of filing a claim for insolvency proceedings or should we leave it alone for economic or social reasons. 

FTJ: What happens to the creditor's claim once insolvency proceedings have been opened?

Expert: First of all, the partner takes over the proper assertion of the claim and keeps an eye on all deadlines. You no longer need to worry about it yourself. Even after the insolvency proceedings have been opened, a debt collection partner remains involved. This is because the debtor must adhere to rules during the insolvency proceedings - for years. It can be difficult to do this consistently, especially if you have several customers who are in insolvency proceedings. At the end of every personal insolvency, it's all about the discharge of residual debt - which means that if you're not at the top of the list of creditors, you still come away empty-handed. The experts then check whether the residual debt discharge should be denied and whether you still have a chance of recovering the debt.

In the many years that I have been working in receivables management, I have been involved in many cases in which large claims could still be realized despite the insolvency resolution. Particularly in recent years, since I have been working for the DIAGONAL Group, I have noticed that the number of insolvencies filed has increased. This is due to many macroeconomic factors. That's why I see a lot of potential in insolvency proceedings - if you have an expert at your side who can master the pitfalls.