Against the backdrop of a souring local economy, 118 real estate professionals gathered at a Bethesda hotel last week for a session of worst-case-scenario group therapy.

Bethesda-based WS&B Kaufman, an accounting firm, charged $100 a head for a half-day seminar last Tuesday on dealing with the ins and outs of bankruptcy. Called "Don't Become Trapped by the Insolvency of Others (And What to Do if It Happens to You)," the course was marketed to subcontractors, general contractors and others in the industry that has been hardest hit by the Washington area's economic slowdown.

Steven Kaufman, who heads WS&B's construction industry group, organized the meeting. He said the idea came to him through conversations with several of his clients, whose financial statements were beginning to reflect the economy's downturn.

One client was having trouble making ends meet because he was behind in his accounts receivables. He came in to decide whether to reorganize his debts through meetings with his lenders or to file for protection from those creditors under Chapter 11 of federal bankruptcy code. Although the cost, time and stigma involved in a Chapter 11 filing make it less desirable, Kaufman advised the client that in this case, it was the only remedy that would free up his building company enough for him to continue in business.

It's always better to avoid litigation, Kaufman said. So the seminar spent as much time discussing ways to avoid bankruptcy proceedings and business deals with troubled companies as it did discussing ways to navigate the waters of bankruptcy.

While some of the builders and developers at the seminar were actually concerned with staying afloat, many others, including lenders and subcontractors, focused more on how to deal with the insolvency of those who owe them money.

David Mueller, controller of the Ficks Brothers Roofing Co. in Baltimore, said that so far the company has had only one instance in which it could not collect a debt. The customer was having financial difficulties and couldn't pay. Luckily, the amount owed was relatively small, Mueller said. But it did inspire him to learn more about bankruptcy.

"I came {to the seminar} to get some information on what our rights are if some of our customers go into a bankruptcy situation," Mueller said. "And more of what we can do on our end to prevent getting into business with someone who might go bankrupt."

The most useful piece of information Mueller took back to work with him on Tuesday was about how to check out companies before doing business with them, he said. When times are good, companies get lax about thoroughly checking the references and financial background of companies they do business with.

Because most subcontractors and general contractors usually have longstanding relationships with one another and with developers, such checks often are unnecessary. But slower business means more competition and increases the number of firms that are working together for the first time, Mueller said, "which makes it a little riskier and makes it more important to get more information upfront before you sign a contract with somebody."

Although some companies are reluctant to hand over critical financial information, "You've got to get past the industry taboo not to ask for financial information," said Patrick Tracy, another of WS&B's accountants, who spoke about preventative strategies.

A seminar attendee, Larry Acker of Acker & Sons Inc., a Kensington plumbing contractor, said that his 60-person firm, which has annual revenue of about $4 million, has always thoroughly checked the firms it works with. Before getting into business with a new company, he checks its credit reports and interviews the lender about the details of the funding of the construction. He also talks to other sources in the industry to determine the financial health of the company and its reputation for paying on time.

Neither Mueller's nor Acker's problems have escalated to crisis proportions, but other companies represented at WS&B's seminar weren't so lucky.

Judy Ceppa, who handles the finances for H&H Electrical Service Inc., said she came to figure out how to collect a bad debt worth $30,000. H&H, a Laurel-based company with a dozen employees and annual sales of about $1 million, did electrical work on a District office building last winter that totaled nearly $60,000. When only half the payment arrived from the general contractor, Ceppa said she contacted the company several times, but the response was not good.

After asking around within the industry, Ceppa said she is "99 percent sure" that the general contractor who owes H&H has been paid by the owner for the work. So when one of the speakers described how to sue for mechanic's liens, she took heart. Under the mechanic's lien law, subcontractors can sue the building owner if the general contractor doesn't pay.

Ceppa said she also came to the seminar to shop around for a lawyer well versed in construction trades.

H&H has had to worry about bad debt on a couple other occasions, Ceppa said. But the claims were always less than $3,000 and lawyers she contacted advised her that the cost of litigation would outweigh whatever she might win in court.

"The lawyers, they say you can't do anything," Ceppa said. "Granted, it's small, but you add those up over several people and it starts getting into big money."