What if client goes bankrupt

In this bad economy I am hearing stories about clients going belly up and stiffing freelancers.

Anyone have any advice and stories to share on how to handle clients going bankrupt?

My only recourse is to take a substantial deposit prior to starting any job or billing bi-weekly so as to not let too much money go uncollected.

You’re on track mp. You don’t want to let your client(s) get too far ahead of you in any economic climate.

A company I was doing a project for changed CEOs on me mid-stream. He decided that the direction the company was going with it’s sales kiosks was not what he thought they should be doing. He fired their VP of Sales (who was “my” client) and then they decided to just ignore the previous work, and blow off my outstanding invoices. Later in the week I got a call from a competitor/colleague telling me that they had called her to quote on “a” project; needless to say, word spread quickly. The guy was a real piece of work.

I started after them in small claims court and finally ended up settling for 60 cents on the dollar, but I had to chase them for six months, and ended up in Superior court. It was, literally, a total waste of time considering how much court prep time it took. The only reason I did it was the principle of not letting them get away with it. Their reputation with local vendors around town went to hell. I still find it hard to understand how/why a CEO would guide his company in such a direction.

But bankruptcy is different. When a company is actively in business, and has assets, you at least stand a chance of recovering something. But when a company files for bankruptcy there isn’t anything to collect; at least not without extraordinary efforts.

It’s hard to do, especially when you’re hungry for work, but you have to consider their financial “qualifications” as much, maybe more, than they have to consider your technical skills; your portfolio shows them what you can do, but you have to take their word (even with a written agreement) that they’ll pay you. I wouldn’t be too shy about asking for that down payment, a written agreement, or insisting on periodic payments based on delivery goals, milestones, etc. Not that it would guarantee payment, but depending on the size of the project, I would look into what it takes to have a Credit Check run on them. At least you would have an indication of their financial situation.

Caveat venditor; “let the seller beware”.