With the economy in the tank, it's no surprise that the number of bankruptcies—both personal and business—is soaring. As a small-business owner, even assuming you're not in danger of going bankrupt yourself, you can end up with some tricky decisions to make if your customers, suppliers, or other business counterparts go under.

The first thing to keep in mind if a business relation goes out of business is that there are a lot of different ways it can happen. A small business might simply close its doors; in that case, if you are owed money, you'll have to file your own court action against the business and its owner.

If it's a small amount, small-claims court can be quite efficient-we have in fact used this with some success in collecting overdue bills from companies that are still in business. But if the amount is larger than the small-claims limit—usually a few thousand dollars, depending on where you are—you'll have to carefully weigh whether going to court is likely to be worth the money and the trouble.

In my experience, legal action is always more expensive, more time-consuming, and more emotionally draining than you expect.

If a company that owes you money files for bankruptcy in federal court, the good news is that there is a highly structured process for adjudicating claims and getting creditors paid off. (Indeed, the purpose of the bankruptcy laws is to bring order to the chaotic process of going out of business or, in the case of a Chapter 11 filing, to give the company a chance to come up with a plan to pay its debts and stay alive.) If you are owed a lot of money by a company that you think won't be able to pay, you can even initiate an "involuntary" bankruptcy and try to force the entity into bankruptcy court—though that's definitely something you wouldn't want to do without a significant investment in legal help.

The bad news is that the bankruptcy process can be very slow and, for an outsider, very confusing; bankruptcies where there is significant money at stake are effectively run by a specialized group of bankruptcy lawyers, and unless you're ready to hire one of those lawyers yourself, it can sometimes be difficult to fully protect your interests. When my previous company, the Industry Standard, went bankrupt, it took several years for claims to get paid, and the ultimate recovery was just a fraction of what was promised at the beginning.