Given the current state of our economy, business owners may be well advised to take preemptive measures to better ensure the receipt of payment for their goods or services. There are relatively basic protections available to businesses, which may provide not only a level of protection but also some peace of mind. For the most part, it will be necessary for a business to secure its protective rights as part of the original contract with a customer or client. However, even if a contract does not specifically incorporate the business creditor’s various protections, there may still be rights and remedies available to the business under relevant controlling law.
One simple protective pre-contract step for a business is to understand the financial status of a customer or client. Requiring a pre-loan or pre-transaction disclosure of credit or other pertinent financial information can help obtain enlightening information. Financial disclosures often reveal valuable information that could forecast impending financial difficulties. An additional benefit of requiring financial disclosures is that if there are intentional inaccuracies in the disclosures that are relied upon by the business in entering into the transaction, the debt may be held non-dischargeable in a bankruptcy proceeding. A non-dischargeable debt survives the bankruptcy process and the creditor can collect any remaining balance after the bankruptcy process is completed.
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