Bankruptcy creditor

Two years ago I did some programming work for an insurance broker in Denver. I created a web-based office tracking system that was the core of their business. Through a series of events, which I won’t go into here, I never got paid for the work¹ and in January the company went into chapter 11 bankruptcy. Since then I’ve gotten about a ream of paper from the bankruptcy court and the lawyers. It’s been fascinating reading the paperwork and getting an insight into this aspect of both the corporate and legal world.

Turns out, I’m a “major creditor” and had the opportunity to attend the court hearings and even optionally participate. Unfortunately, the bankruptcy case is being overseen (heard? tried?) in Denver and it just isn’t worth the airfare. Frustratingly, the amount owed me – even being a “major creditor” – wasn’t worth hiring a lawyer to represent me.

A week ago or so, the chapter 11 was converted into a chapter 7. With my understanding of how things are coming out, I’m unlikely to see any of the amount due to me. Which means I’ll have the opportunity to see if there’s a way to deduct some of this loss from my taxes (which looks like it’ll be a slog through IRS publication 535).

It’s been an interesting, if expensive, learning experience. One that I hope not to repeat in the future.

Update: Looks like I can’t even write it off as bad debt for my taxes. This is going to be a very expensive lesson indeed.

¹ Moral of that story is do everything net 30. Lesson learned.