It's one of the most frustrating situations a vendor can face. The work was delivered, the invoice was sent, and then the client announced it was closing - or simply stopped answering. Sometimes the founder is already promoting a new company.
Your options depend on how the business closed. Here's how to work out where you stand and what to do next.
Step 1: Gather your documentation
Before anything else, collect everything in one place: the signed contract or statement of work, every invoice, proof of delivery (reports, files, ad account screenshots), and all emails or messages where the client approved work or promised payment. Save copies outside any shared tools the client controls.
Step 2: Find out how the company closed
- Formal bankruptcyIf the company filed for bankruptcy, collection efforts must generally stop. Creditors are typically asked to file a proof of claim with the bankruptcy court by a set deadline. Don't miss it.
- Dissolution or wind-downMany companies close by dissolving with the state. Depending on the jurisdiction, there may be a process for creditors to submit claims, and remaining assets may be used to pay debts.
- Simply stopped operatingSome businesses go dark without any formal process. The legal entity - and its debt to you - may still exist. State business registries will show its current status.
Step 3: Send a formal demand
Send a written demand letter to the company's registered address and to the officers listed in public records. State the amount owed, reference the invoices and contract, and give a clear deadline. It creates a record, and it sometimes works.
Step 4: Consider your recovery options
- Small claims court - fast and inexpensive for smaller amounts. Limits vary by state.
- Personal guarantees - if the founder personally guaranteed the contract, you may be able to pursue them directly.
- Collections agencies - often work on a percentage of what they recover.
- An attorney - worth it for larger balances, or where assets may have been moved to a new venture.
Watch the calendar
Claim deadlines and limitation periods can be short. If the amount matters to your business, get professional advice early rather than waiting to see what happens.
Step 5: Protect the next vendor
Factual, well-documented accounts help other businesses avoid the same outcome. Stick to what you can prove, keep your records, and use official channels such as the Better Business Bureau. If you believe a founder is repeating the same pattern across companies, we want to hear about it - get in touch through our newsletter signup.
To spot the warning signs earlier next time, read seven warning signs a client won't pay and how to check a founder's track record.
This article is general information, not legal advice. Bankruptcy, dissolution and collection rules differ by jurisdiction; consult a qualified attorney about your specific situation.