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Client Declared Bankrupt - Best Way of Extracting Any Fee

Client Declared Bankrupt - Best Way of...

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I ask more in hope than expectation!

A client has phoned me this morning to say that he is declaring bankruptcy. I have his paperwork for the year, and almost completed accounts and tax returns.

Should I send an invoice for work to date, and hold everything?
Will the client likely need the accounts and tax returns and so have to pay me by some means?

Or should I complete everything and send a full invoice and hope for some kind of money settlement coming out of the bankruptcy?

I am amicable with the client and don't want to be obstructive. But don't want to naively complete everything and find out I had more of a lever than  thought.

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By petersaxton
06th Jul 2011 13:27

Don't expect anything

If he's a sole trader I don't hold out much hope. If it was a limited company there's a chance the liquidator would want to see what you'd done and would pay for it.

I've made mistakes in the past and given accounts to somebody who needed them and who was a decent individual. He was so obviously in a difficult situation I should have demanded the money up front. Unfortunately, money problems make people very desperate.

I think I've lost about £5,000 from three clients so I suppose that's very acceptable. I keep thinking it would be nice to have an extra £5,000 in my bank but after tax it's only £3,000 and £3,000 buys nothing nowadays - sorry just being silly!

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By DMGbus
06th Jul 2011 13:45

Trustee in Bankruptcy

Assuming that your client is "properly" going bankrupt - as opposed to deciding not to pay creditors and hoping that they'll go away, then a licenced insolvency practitioner should be dealing with the debts.

It is my expection is that the licenced insolvency practitioner (IP) will see some value in the work that you have carried out and quite possibly "buy" it off you.    Far cheaper to do this than re-do the work to compute a tax loss relief claim.

So advice is to contact the IP and negotiate something.

 

 

 

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By bernard michael
06th Jul 2011 14:15

Bankrupt client

If he is making himself bankrupt you will be dealing with the Insolvency Service, who will not pay you to complete the work. My advice is don't do any more, send an invoice for work done to date and treat it as a bad debt when he is bankrupt. There may be a chance that the Insolvency Service will locate some assets and pay a dividend. In any event he will have to complete the lengthy questionnaire about assets and liablities and may need some of the information you have. Whether you give it to him or not depends how soft you are. However if you treat him kindly he is more likely to act as and unpaid advocate of your practice. Also as bankruptcy normally only lasts for 9 months he may be back to you with a new venture and a grateful wallet 

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By agknight
06th Jul 2011 21:19

Many Thanks

For the replies.

I just thought it was worth checking, so I thank you each for your time taken.

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