Good Afternoon Mr. Barnett,
RE: If they go bankrupt, can the money they pay us for that product now get clawed back as part of the bankruptcy?
Response: Generally, if the bankruptcy filing has not occurred, a "claw back" would not be allowed - the customer is paying its debts.
RE: They have a number of receivables that are over 90 days old
Response: This is an internal decision for your company - however, it is best to apply the receivable payments to your oldest invoices, as lenders or the like, may or will discount or exclude all receivables over 90-days, and this will affect ratios and other areas.
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Richard McGovern CMA, CFM
Chief Financial Officer
Richard Mc Govern
Duluth MN
United States
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Original Message:
Sent: 06-09-2025 08:45 AM
From: David Barnett
Subject: Bankruptcy rules on payment from customer
Say we have a customer who owes us $2 million. We have a product that only they can use (or we could only sell it elsewhere at a significant discount). They are willing to pay us cash for that product. We are worried that they may go bankrupt. If they go bankrupt, can the money they pay us for that product now get clawed back as part of the bankruptcy?
Another consideration: They have a number of receivables that are over 90 days old? If they pay us cash, does it make more sense to apply it to the oldest receivables first, or would that make the bankruptcy issue worse?