Personal Bankruptcy I am IndCntrtr on Retainer Agrmnt, Client pays me late, worry they decl BKUP, advice

[Stevewa]

Hi, I am an independant contractor with a signed retainer agreement for computer maintenance services for a client. The aggreement has been in effect for over 12 months now, and everything has been going well, but now they are 2 months late in paying me, and I am afraid they will be declaring backruptcy. They are not paying any of their vendors due to cash flow problems. I need this money to continue my business as they are my biggest client.

The agreement did not have any clause about suspending services if their payment is late, but it does have a clause about charging a late fee, but they may never pay the intial amount, much less a late fee. I have never charged them a latefee before, even though some months they have been behind 15-20 days.

The agreement does state that it can be cancelled by either party with 30 days written notice, to allow both parties ample time to find a replacement.

I do not send monthly invoices for payment because since the beginning the checks would come every month pretty close to the due date.

I am worried that if they do declare bancruptcy, I will not be listed as a creditor because I do not send monthly invoices, even though I have a signed retainer agreement.


I would appreciate advice on what kind of documentation I should write, to ensure I have the best chance of collection my payments. This is not a secured debt, i.e. I don't have any liens or collateral being held to guarantee my payment. However I do have access to the bldg, computer systems, and email servers, so I would think it would be in their best interest to pay me on time. I do not plan on doing anything bad in order to collect my money, but I'd like advice on what is considered legal and fair.

Should I:
1. Deliver a letter reminding them about the past due amount?

2. Deliver invoices for the 2 months of service that I have not been paid for?

3. Deliver a letter that informs them that I will suspend service if the amount is not paid by X date?

Will documents like this help my case if they go into backruptcy protection?
Should the letters be delivered via registered mail so I have a signature proof that they recieved them.

I am reading "How to get Paid" by Stephen Elias, for the proper actions to collect from clients who are in backruptcy protection, so I understand my options need to happen prior to the automatic stay event.

I realize that if they do declare BKUP, I may not be able to collect anything, but I'd like to make sure I am doing things the right way to strengthen my case.

I'd also like to know if they try to terminate the agreement without giving the 30 days notice, would I have grounds to take them to small claims court to try to collect?

And is there any collateral I can hold to help my collection efforts, like not giving up my password access to the systems, etc., or would that be considered illegal?


Thanks for your thoughts.

 

[Theresagail]

Yes, you should send a delinquent letter stating the amount due and to avoid late fees of __ please pay with in __ days. If payment is not here by__ time we will have no choice but to suspend service.

If they file bankruptcy you can still put a claim in as you have a signed agreement. Writing letters etc is not going to do anything for bankruptcy-- you filing a claim on the case with your contract is all you really need to do.

Terminating the service would be ok if you give them the 30 day notice that you will so @ the time you write the letter put that in there that in 30 days from the date of this letter payment is still not received we will cancel your service.

You can always small claims them too so long as they are not in bankruptcy, I would try to sue for the full amount of the contract plus late fee's it will be up to the judge if they will award that or not.

 

[Stevewa]

Thank you. I have written the following letter:

January 7, 2010


Dear _______,


Payment is late again for our computer communications and data maintenance services outlined in our retainer agreement with ____________________. We feel we must write a formal complaint to address this ongoing problem. This delay in cash flow is very harmful to our small business.

We have not received any communication explaining why payment is late. Our services keep your computer and communications and data systems performing properly so you can run your business.

It is therefore with regret that we must inform you that if your account is not paid in full by Jan 16th, 2010, we must suspend our services until the account is brought up-to-date.

Your current account statement is attached.

Thank you for your attention in this matter.


Sincerely,




Steve Wa

 

[Theresagail]

That sounds good-- Just so they know you are serious I would send one letter reg mail and one certified to the Accounts Payable Dept. If they don't pay by the time you say you need to suspend service ( since you already stated you would, if you don't it is considered a threat) and You should file small claims at that time.

 

[Stevewa]

I revised the letter a little:

Re: ________ Monthly Retainer Payment

Payment is late again for our computer communications and data maintenance services outlined in our retainer agreement with _____________. We feel we must write a formal complaint to address this ongoing problem. This delay in cash flow is very harmful to our small business.

We have not received any communication explaining why payment is late. Our services keep your computer and communications and data systems performing properly so you can run your business.

It is therefore with regret that we must inform you that if our invoice # 2939, dated 11/01/09, due Dec 16th, 2009, amount $1,500.00, and our invoice # 2961, dated 12/01/09, due Jan 15th 2010, amount $1,500.00 are both not paid in full by Jan 16th, 2010, we must suspend our services until your account is brought up-to-date. A 1.5% per month (18% per year) late payment fee will be assessed on any unpaid balance remaining after the original payment due date. We accept Visa and Mastercard and company check.

Your current account statement is attached along with a copy of the original retainer agreement and amended retainer agreement.

Thank you for your attention in this matter.


Sincerely,
======================

I mailed it certified with a return receipt label, so I can track it's delivery and have proof that it was received and signed for.


I've read that if a company declares bancruptcy, since I am a creditor (they owe me money), I should find out from the bankruptcy court, correct?

I'm wondering if they declare bankruptcy before my suspension date of Jan 16th 2010, can I still suspend services? I know with bankruptcy there is a thing called an automatic stay, and you're supposed to stop trying to collect a debt once you receive notice that they are declaring backruptcy, but because this letter was sent prior to them declaring any bankruptcy, I should still be able to suspend services due to non-payment?

I just don't want to be expected to have to continue to perform services under the retainer agreement, since they are behind on payments, and there is probably no chance I would get paid for the work I'm doing while they are going through the backruptcy process.

If they declare bankruptcy prior to Jan 16th 2010, does that prevent me from starting the small claims court process?

 

[army judge]

Re: I am IndCntrtr on Retainer Agrmnt, Client pays

If they declare BK, every action is held at abeyance. As an ind contractor you stand far down the line. If they do not pay you, expect to get pennies (if that) on the dollar! Hire a lawyer, or at least speak to yours about possible courses of action. It might be prudent to speak with your client's executives about payment. Otherwise, it might be time to consider pulling out of servicing them.


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