Guide · If you need money this week
Your customer filed bankruptcy owing you $50,000. What do you do this week, and what keeps your business open?
By Alex Makowski Published
Treat the $50,000 as gone for planning purposes; unsecured creditors in a business bankruptcy often recover little, and slowly. File a proof of claim before the deadline anyway, and check whether goods delivered in the twenty days before the filing qualify for priority. Then fund the hole: a working capital loan sized to the payroll and supplier bills that invoice was going to cover, in one to three business days, on the rest of your deposits.
In this guide
- 01This is different from a late payer
- 02The paperwork, quickly
- 03Funding the hole
- 04The change that stops the next one
- Won't affect your credit
- Free, no obligation
- Up to $500K
01
This is different from a late payer
A customer who is 45 days late will probably pay. A customer who has filed is under an automatic stay: you cannot call them for payment, cannot pursue collection, cannot repossess goods, and any payment they made you shortly before filing can in some cases be clawed back as a preference. The invoice has become a claim in a court process with deadlines, and unsecured trade creditors are near the back of the line.
Owners who have been through it say the same thing: decide on day one that the money is a loss, file the paperwork so that any recovery is a bonus, and spend your energy on the business that is still here.
02
The paperwork, quickly
File a proof of claim with the invoices attached before the bar date the court sets. If your claim is not listed in the debtor's schedules, or is listed as disputed, you must file or you are out. If you delivered goods in the twenty days before the filing, that portion may qualify for priority treatment ahead of general unsecured claims — it is worth a call to a bankruptcy lawyer for an hour, because it can be the only part you ever see.
And stop shipping on open terms. If the customer is reorganizing rather than liquidating and wants to keep buying, it is cash in advance from now on, with the court's permission where needed.
What each underwriter weighs
03
Funding the hole
The $50,000 was going to pay something: this month's payroll, a supplier, the rent. Those bills have not moved. A working capital loan or a cash advance on your remaining deposits, sized to the bills that invoice was covering, funds in one to three business days. Send the bankruptcy notice with the statements; a funder reading a named customer's filing next to a specific shortfall is reading a one-time hit, not a declining business.
Amounts run half to one and a half times a month's deposits. If the lost customer was a large share of your revenue, the deposits going forward are smaller and the offer will reflect it — which is the honest signal that the business needs to be resized to the customers it still has, not just bridged.
04
The change that stops the next one
A single customer large enough that its bankruptcy threatens yours is the risk, and the fix is limits: a credit limit per customer, deposits on large orders, shorter terms for anyone over a set share of revenue, and a look at public records before extending terms to a new large account. A line of credit is the backstop for the year the limits are not enough.
Written by
Alex Makowski, Owner
Alex Makowski owns and runs Business Loans for America and has been placing funding for U.S. small businesses since 2021. Businesses he has worked with have secured $50M+ in financing across 1,200+ placements. He writes and reviews every guide on this site.
FAQ
Related questions.
- Will I get anything back from the bankruptcy?
- Sometimes a percentage, often years later, occasionally nothing. It depends on the chapter, the assets and where you sit in the priority order. File the claim so you are in the pool; do not plan the business around the recovery.
- Can the trustee take back payments the customer made me before filing?
- Payments made in the ninety days before filing can be challenged as preferences. Payments made in the ordinary course of your usual terms with that customer have a defense. Keep the payment history; a lawyer will want it.
- Does a customer's bankruptcy hurt my own credit or funding?
- Not directly. What a funder sees is a deposit that stopped. With the filing attached, it is an explained, dated loss. If the business shrinks as a result, the smaller deposits are what get priced going forward.
Guides
More on if you need money this week
Workers' comp audit bill
Check the sub certificates first; half of these bills shrink. Then the insurer's installment plan, then funding.
Lease balloon due
A machine you will keep for years should be refinanced as equipment, not paid off with working capital.
The bank said no
A decline is a statement about one lender's model, not about whether your business can be funded.
Alternatives to a bank loan
Four products the bank's model does not decide, what each reads instead, and what each costs on $50,000.
What is the fastest way to get working capital?
Payroll is Friday and you are short. What funding arrives that fast?
Sources
- U.S. Courts — Bankruptcy BasicsThe federal courts' own explanation of the chapters, the automatic stay and how creditors' claims are handled.
- U.S. Small Business Administration — LoansFederal loan programmes, eligibility and what the SBA does and does not guarantee.
One application, every lender we work with
Find out what you qualify for before you need it.
Eleven questions, about two minutes. You see offers side by side and take one, or none.
- Won't affect your credit
- Free, no obligation
- Decisions usually inside 24 hours
- Up to $500K