Work with your vendors before resorting to bankruptcy – Travel Weekly

Mark Pestronk

Q: In an effort to stay in business during the pandemic, my agency has fallen far behind on payments to everyone except our employees. Right now, we owe money to a GDS vendor, back-office vendor, customer relationship management (CRM) software vendor, back-office system vendor, meetings and events software vendor, telephone company, internet service provider and 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 because we are getting calls from collection agencies. Should we just file for Chapter 11 bankruptcy, which would stop the threats while allowing us to continue in business? If not, what do you recommend we do?

A: You should consult a business bankruptcy attorney, who can offer expert advice on whether you should file for Chapter 11 bankruptcy. My own view is that it is nearly impossible for travel agencies and other travel companies to continue in business after a bankruptcy filing, so you should try to avoid it if at all possible.

Thousands of travel companies are in your position, yet there have been very few bankruptcy filings, as far as I know. The reason is that vendors are generally forbearing from filing lawsuits, as they understand your financial position and know that they can't collect until business improves and you become profitable again.

For example, many agencies with GDS contracts have large unpaid shortfall bills from 2020 and the first two quarters of 2021. In most cases, the vendors are doing little to collect these balances. As I mentioned in last week's Legal Brief column, I know of no agency whose GDS access has been involuntarily terminated during the pandemic.

So, this means that you can probably expect no lawsuits by the vendors and other creditors that you name, at least until the travel business becomes normal again. Even so, you need to do something about the dunning calls and letters that are stressing you out.

In my experience, most vendors that you don't need any more are settling for a small payment or series of small payments. If you need the vendor in order to stay in business, try negotiating for a new, multiyear agreement that forgives most or all of the existing bill.

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

You cannot simply tell a business-debt collector to stop harassing you, like you can with a consumer-debt collector. To stop harassment from collection agencies, you can offer a small settlement, or you can ignore the calls, although the latter can harm your business credit rating.

In short, you can probably deal with the vendors outside of bankruptcy by selectively settling, extending contracts or ignoring, depending on how much you need to continue to do business with the vendor.

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Work with your vendors before resorting to bankruptcy - Travel Weekly