January 16, 2009 / Law Alert

Your Rights When Dealing With An Insolvent Customer

With the state of the economy, some of your customers may be turning into slow pays or, worse, no pays. If your customer is insolvent, you have rights under state law to demand COD payment, to halt goods that are being shipped to your customer and to reclaim goods received by your customer in the past 10 days. In addition, although customer bankruptcy filings will cause some disruption, they also provide you the opportunity to change the terms of sales to your bankrupt customer, and under recent changes to the Bankruptcy Code, goods sold to and received by your customer within 20 days before it files bankruptcy are entitled to a priority payment.