What’s your game plan in the event one of your vendors files for Chapter 11 reorganization? If you don’t have one, now’s the ideal time to do it.

The bankruptcy storm sweeping across the American landscape is far from over, finance experts warn. U.S. businesses are now filing for bankruptcy at a faster annualized rate, according to data collected in June.

Companies filing for Ch. 11 — potentially your vendors — are rising at a rate 34% higher than 2007. Consumer bankruptcies are being filed at a breakneck pace, too — up 23% from last year (up 33% from June) and on a pace to go over the 1 million barrier. Consumer bankruptcies haven’t been that high until the rush to file before new laws tightening bankruptcy procedures were implemented in 2005.

The struggling economy and floundering housing market are the source of today’s problems. But there’s a ripple effect that leaves very few businesses immune to the effects.

Obviously, vendors aren’t going to call you and warn you they’re on the verge of filing for Ch. 11. But the next time contracts roll around with established vendors or you offer contracts for new vendors, broach the subject of bankruptcy.

At contract time, determine if there’s a way to maintain your trade relationship with a vendor as it seeks to reorganize under Ch. 11.

Meanwhile, to protect yourself, you might want to start shopping around for back-up sources, should one of your vendors suddenly become unable to keep up with your needs.

Finally, it’s a good idea to bring in your CFO or other financial officers for advice, guidance and approval.

It’ll also show them that you’re on the ball and looking ahead.

in your contract?

CFO

Tags: bankruptcy, Ch. 11, trade, vendor