What do I do if a customer closes their business and still owes me money?
Your customer closed their business and owes you money — what to do
Short answer
Act quickly: the window to file a creditor claim is time-limited. First, determine whether the business filed formal bankruptcy (Chapter 7 or 11) or simply stopped operating. For bankruptcy, you file a proof of claim with the bankruptcy court — usually within 70–90 days of the filing date. For non-bankruptcy dissolution, check your state's winding-up procedure; many states require businesses to notify creditors and settle debts before distributing assets to owners. If the owners took assets out before paying creditors, a fraudulent transfer claim may be available. For sole proprietors and personally-guaranteed LLC debts, owners remain personally liable.
The first question is how the business closed. A formal bankruptcy filing (check PACER.gov for Chapter 7 or 11 filings) triggers a stay on collections but also creates a structured process where creditors file claims. A business that simply locked its doors, stopped paying bills, and dissolved without a formal process is a different situation — potentially better for you, because the owners may have personal liability.
For corporations and LLCs, the general rule is that shareholders and members are not personally liable for company debts — the entity structure shields them. Two important exceptions: personal guarantees (if an owner signed a personal guarantee of the business debt, you can pursue them personally), and fraudulent transfer (if the owner transferred company assets to themselves or related parties within a window before closing, a fraudulent transfer claim may reverse those transfers in your favor). Both require a lawsuit, but they extend your reach past the now-dead entity.
Sole proprietors and general partnerships are different. There is no liability shield — the business and owner are legally the same. An invoice owed by a sole proprietor is owed by the individual. Even if they 'closed the business', the personal obligation survives. You can continue to pursue payment and, if necessary, sue the individual. The statute of limitations runs from the original invoice due date, not from when the business closed.
Bankruptcy proof of claim: if a formal Chapter 7 or Chapter 11 was filed, go to PACER.gov (federal bankruptcy court records), search for the company name, and find the case number. The bankruptcy notice will specify the claims bar date — the deadline to file a proof of claim. Missing this deadline typically means losing your right to any distribution. Proofs of claim are filed directly with the bankruptcy court online or by mail; the forms are standardized (Form B 410) and require only basic invoice documentation.
If you missed the bankruptcy deadline or the business dissolved without bankruptcy, you may still have options: a fraudulent transfer lawsuit (typically 2–4 year window depending on state), a claim against the dissolved entity's remaining assets (many states allow suits against dissolved entities for a period after dissolution), or a small claims action against the owner personally if the business was a sole proprietorship or if a personal guarantee existed. The earlier you act after learning the business has closed, the more options remain open.