Work with your suppliers before you go bankrupt: Travel Weekly


Marc Pestronk

Question: In an effort to stay in business during the pandemic, my agency has fallen significantly behind on payments to everyone except our employees. Right now we owe SCM vendor, back office vendor, customer relationship management (CRM) software vendor, back office system vendor , a meeting and events software vendor, a telephone company, an Internet service provider, and a technology consultant. No one has sued us yet, but several are threatening to do so, making life very stressful for me and my staff, especially as we get calls from collection agencies. Should we just file for Chapter 11 bankruptcy, which would stop the threats while still allowing us to continue our operations? If not, what do you advise us to do?

A: You should consult with a bankruptcy lawyer, who can give you expert advice on whether you should file for Chapter 11 bankruptcy. My personal opinion is that it is almost impossible for travel agencies and other travel agencies continue to operate after filing for bankruptcy, so you should try to avoid it if possible.

Thousands of travel agencies are in your position, but there have been very few bankruptcy filings, as far as I know. The reason is that sellers usually refrain from suing because they understand your financial situation and know they cannot collect until business improves and you become profitable again.

For example, many agencies with GDS contracts have large unpaid invoices from 2020 and the first two quarters of 2021. In most cases, suppliers do little to collect these balances. As I mentioned in last week’s Legal Brief column, I am unaware of any agency whose access to GDS was unintentionally terminated during the pandemic.

So that means you probably can’t expect legal action from the sellers and other creditors you name, at least until travel business returns to normal. Even so, you need to do something about the dunning calls and letters that stress you out.

In my experience, most vendors you no longer need are happy with one small payment or a series of small payments. If you need the seller to stay in business, try negotiating a new multi-year deal that forgives most or all of the existing bill.

If a seller remits the debt to a collection agency, it probably means that the seller has written off the debt entirely, which you can take as a good sign. Although collection agencies can sue in their own name if the debt is sold or assigned to them, such lawsuits are extremely rare.

You can’t just tell a commercial debt collector to stop harassing you like you can with a consumer debt collector. To stop the harassment from collection agencies, you can offer a small settlement or ignore the calls, although they can hurt your business’s credit rating.

In short, you can probably deal with suppliers outside of bankruptcy by either settling selectively, extending contracts, or ignoring, depending on what you need to continue doing business with the supplier.


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