Client owes me $$

[DTS]

I have a client that called last night to tell me that he may or may not go into bancruptcy.

I've known this fellow since he was a small kid, and up to now, extremely responsible. At our meeting to hand over work and get my fees, which totaled $1,100, I got this story how strapped he was and what bad financial shape he was in. At that moment, I thought "here we go!" I was trying to be understanding and at the same time, knew I had been taken advantage of.

I told him that I would invoice him each month and he could pay me in three payments and that I would be fine with that. He agreed to that. That was November and not one dime!

My question is, if he goes into bancruptcy, is there a way for me to recover my fees or will I just have to kiss it goodbye?

I never put myself in this position and sure feel like such a sucker now.

Sorry for the long post. I am venting, but do need to know how to cover this, if possible.

Thank you,

Dennis

[KJ Judd]

Dennis,

I feel for you. I believe this is what is called a "learning experience". I had one awhile back. Now I require a retainer from all clients with delinquent tax accounts. Although I currently have a couple of clients in financial straits who have not paid me for last year's return.

[DTS]

Kj

That is part of the reason for my post. A new season is here, I know what's coming and I'm not inclined to do any more for him until he's paid in full, but feel I am in between a rock and a hard place because of our families' history. That is not to excuse what's taken place.

I was wondering if you would mind sharing what you feel an adequate retainer would be in this situation? I may consider this, but will not get caught like this again. There will be an new understanding, assuming I get a retainer, that nothing will be handed over until he's current with his billing.

Your thoughts?

Thanks,

Dennis

[geekgirldany]

I get half up front on anything over $100 and those with multiple year returns. If they don't pay no return. I know it is hard with family and friends. I had my great aunt tell me to never do business with anyone who is family or who is a close friend. I have stuck to that. My brother wanted me to help him awhile back with setting up QuickBooks and I told him I would not. That it was best to get someone else. I am thinking about taking credit cards this year. QuickBooks has pretty good pricing. This will allow those that say they don't have the money to put it on their credit card.

I think if your customer claims bankruptcy you can't go after him for the money. If it was me I would really be ashamed to come back and expect you to do my tax return after having not paid for previous invoices.

[erchess]

I would think

that there should be a way for you to get in line with his other unsecured creditors for whatever good that does. You might have to hire a lawyer but I would think you might be able to add the fee to his balance and deduct as a business expense any part of the fee that you could consider was not reimbursed. Of course if he is sufficiently broke the unsecured creditors will get nothing and even if he has to do a wage earner plan the money will be slow coming in and you may not get all of it. Then again maybe you don't want to bother.

[August @ ADG Financial]

I get all the fee before the work is completed. I tell the client this going in. In June I had a 3 year problem the fee was $1,050. I did one year at a time. He paid for one year at a time when he had the next $350. for the next year we did the next year. Quite honestly it's the only way. We want to help, we want the work and in our eagerness we get hurt. Take it from experience.
Yesterday, I had a new client. Got a $808. refund. Comes down to payment no check! I said well I can't put it in until I get payment. We went back and forth for about 15 minutes. I have to pick up my brother, my checks are at home and I don't get paid until Friday. I said she might miss the 24th efile drop date if it didn't go in today. Long story short after 15 minutes she goes down the street to the ATM and gets the $115. It's the only way to run our businesses. We do about 500 returns and in 2007 on April 15th we were left with only 2 outstanding invoices. Take my advise ask for the money. It's a little uncomfortable at first but you won't be fustrated later. August

[JohnH]

Take time off

I don't know who said it, but it was on this forum. In a previous discussion on non-paying clients, someone replied that "If I'm not going to get paid, I'd just as soon take the time off." I loved that comment and it's become my new collections mantra.

(I tried a search but couldn't come up with the thread - whoever said that please step up & take credit for it...)

[Jesse]

If he does file it is doubtful there will be any assets or money available for the creditors and your probably wasting your money on a lawyer. I had a couple file and received a notice from the bankruptcy court at which time I could not send any more invoices or make any contact to ask for money. If there is a possibility of any available funds to pay creditors you will receive a notice that you can file a claim.

If you receive that notice it might be worth it to have a lawyer do so, it depends on his total creditors that file a claim for their fair share so you could get pennies on the dollar. It stinks!

The client can "volunteer" to pay you, as I actually had a client that filed and told me in advance that he had no choice but to list me as a creditor. It was only for $65, but I was appreciative that he came in after he had filed and paid his bill.

[Donald Rihn, EA]

Uh Oh, he owes!

Been there, done that.

If banruptcy hasn't been filed, try everything to get something. If not cash, get assets...his lawnmower, TV, whatever he will give you.

Now, when he does file bankruptcy, the client may need some tax work done, or copies of his file. Charge for the work and the copies, in advance. The courts will usually allow this.

File a claim when you do get the bankruptcy notice. You may get something.

I did on a corporate bankruptcy and about 3 years later I got about 1/3 of what they owed.

I was in a better shape than you, maybe. I knew they were having financial trouble for several months and I insisted on my fee, marked up some by what I thought I would lose if they went bankrupt. I was paid before I did the next month's work. So I was only out about 1 month of work.

As a side note, I don't sell used vehicles to relatives nor loan them money.

[Jesse]

Been there, done that.

................Now, when he does file bankruptcy, the client may need some tax work done, or copies of his file. Charge for the work and the copies, in advance. The courts will usually allow this.................

Consult w/ a lawyer on this, but it is my understanding that if you bill before Brptcy filing it will be entered in as a bill to be discharged. So if you do more work this person, maybe better to bill after you know he filed so that it can't be entered into the Brptcy filing and then you have the right to bill, call whatever to get your money for the "new" bill.

[John of PA]

Work with him

Work with him and be patient. I had a client who went bankrupt and later when he got back on his feet he paid me off in full, even though he was not legally obligated to. He appreciated my hanging in there with him.

[Jesse]

Work with him and be patient. I had a client who went bankrupt and later when he got back on his feet he paid me off in full, even though he was not legally obligated to. He appreciated my hanging in there with him.

Another case were facts & circumstances need to be looked at carefully. Some people think the act of filing bankruptcy autimatically qualifies the person as a "deadbeat", when this is not always the case. However, sometimes it is the case.

I am from a small town and think I am too compassionate, I have efiled returns for so many people over the years and allowed them to pay me when their refunds come in rather than pay the high RAL fees from other branches and every year I have more and more people that don't return to pay me and just go elsewhere to have their returns prepared the following year.

Some of these being people I considered part of my extended family as I have done their taxes for so many years and I thought I could trust them. No more patience, especially this time of year, like JohnH quoted, "If I'm not going to get paid, I'd just as soon take the time off."

[DaveO]

Have him reaffirm his debt to you

Then it will survive the bankruptcy. If he values his relationship or needs your professional services he will be willing to do this.

[sea-tax]

Then it will survive the bankruptcy. If he values his relationship or needs your professional services he will be willing to do this.

I think Dave is on to something here. It is also my understanding that if you can get some written proof that the person who owes you recognizes this fact as is will to set up an agreement to pay you off irregardless of the BK then I think you maintain the legal right to collect the debt. However you would have to look to state law.

As a side Dennis don't feel bad and it is not you who should have to worry about the family relationship, it is the client who has embarrassed himself not you.

The fact is I do feel some what bad for clients like these but at the end of the day I have a family to feed as well. Also I might add I do not go eat at a restaurant and consume the $100 steak unless I know first that I can pay for it. If I did not pay the establishment would contact the local authorities and I might be arrested on the spot. What this gentleman is doing to Dennis is the equivlent of stealing.

[DTS]

To All

Each and everyone of you have a good take on this and good suggestions, as well. We all hate it when people put us in uncomfortable positions like this, regardless of the situation. Problem is, I think they know this and how to manipulate it!

I will email him today and see if I can get some kind of acknowledgement from him regarding the bill. At this point, I'll be happy if he agrees to pay $50 p/mo until paid off. I will not contact an attorney, as I'm up to my eyeballs in attorneys right now.

Anyway, I've learned a good lesson that will not be repeated in the future! You do something kind for someone and they take it as a sign of weakness.

Thanks, again!

Dennis