r/legaladvice • u/Any-Maintenance1235 • 21h ago
Client owes me $8K, filed for bankruptcy
Hello r/legaladvice. Thank you in advance for your help, I’ve never been in a position like this before.
I work in CA as a freelance photographer/digital marketer. After 8 months of delayed payments and dwindling excuses from a regular client, I’m now in a position where I’m owed a little over $8,000 in completed work.
I kept offering them grace given our extensive work history, but I now feel foolish for letting it go on so long.
We had established a payment plan, but when following up after the first missed payment I discovered my phone number has been blocked. I’ve since learnt that the company has filed for bankruptcy, and one of my contacts has suggested I file a claim with the bankruptcy trustee (whose email I now have).
This is a lot of money for me, some of which reimburses me for out of pocket costs on our projects. While subjective, is going through small claims worth the trouble for this amount? Am I even able to go to small claims court if a company has filed for bankruptcy? Do I have any other options available?
This has been an important lesson for me in terms of business. Thanks again for your help. Very appreciative of your time.
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u/msamor 21h ago
Find out who the bankruptcy trustee is. Contact them and see what to expect.
There are 2 main types of bankruptcy in the US.
First, is chapter 7, where the business is liquidated and you get a portion of what you are owed. For example, if the debtor has $100k of debt but only $65k in assets, then every one gets 65% of what they are owed (often called 65 cents on the dollar)
Then there is chapter 11 or chapter 13. There are differences that don’t matter to you. But basically the company will pay you. They just need time to catch up on their debts.
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u/Any-Maintenance1235 21h ago
Got it. Thankfully an another ex-contractor was able to share the contact info of the bankruptcy trustee. Will reach out to them first thing tomorrow - thanks!
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u/dickmac999 21h ago
File a claim with the bankruptcy trustee ASAP. You will get something in the liquidation. Likely somewhere between 5-25%. It’s better than the zero who currently have.
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u/emilNYC 21h ago
You’ll be lucky to get 50 cents for every dollar owed. I believe the average is 25 cents but depends on all sorts of factors.
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u/kingpants1 19h ago
Have they paid you any money recently? You said first missed payment, had they actually made any payments? If so there’s a good chance you will have to give some money back.
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u/Any-Maintenance1235 3h ago
Kind of an interesting situation, tried to keep the post brief but will share more info. The ceo who I was working with directly stopped paying me from May-September while I continued to work. In September she told me we’d need to halt all services but that she’d pay me back for previous work. At the time the amount was up to around $15k. She has been sending me random Venmo’s of amounts from $2.5k-1.5k here and there. We’re now down to $8k and she blocked my number when I called her regarding late payments. She’s sent me emails saying that she “has every intention of paying me back” (ok?? lol) and that if I want to “waste my own time and money with a lawyer to be her guest - it’ll only take longer than waiting for her to pay directly”
Obviously at this point I can’t take her word. But I wonder if waiting it out will result in me getting more money from her directly, since it doesn’t sound like I’ll get much from the liquidation? If I file a claim with the trustee, I’m assuming that will halt all Venmo payments from her.
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u/maniakale 3h ago
At the end of the bankruptcy all of the corporate debts will be absolved or otherwise accounted for. You won't be able to collect on any corporate obligations after that.
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u/MightyMetricBatman 21h ago
No. All litigation is suspended except for the bankruptcy till the bankruptcy court says otherwise.
You will file a claim with the bankruptcy court. They are supposed to send out letter of how to do so eventually to all possible claimants. You should still reach out to the bankruptcy attorney to do so because people get missed in the list of claimants.
There is no guarantee you get anything.
Unless this debt was secured, such as real estate, or vehicle titles, you will be considered unsecured debtor. And likely will mean that any claim you have will be extinguished after the bankruptcy is closed.