Bankruptcy Do's and Don'ts
Admitting to yourself that you business is in financial trouble is difficult. Deciding whether or not you should file for bankruptcy is even harder. There are many factors to consider including whether you qualify under Chapter 7 or Chapter 13, how to file a petition, which creditors to list on the forms, and more. Keep in mind, you'll want to have important documents close at hand when making this decision.
For instance, be sure to have access to your company's current financial statements, such as balance sheets, profit and loss statements, projections, and other important information. Follow along as FindLaw walks you through some key considerations when deciding to declare bankruptcy for your small business.
DO admit to yourself that your company is in financial trouble. Usually, the sooner you address the problem, the easier it is to solve.
DO let your creditors know that you are having problems. Your creditors are like every other business-they need customers and want them to succeed. If you are honest with your creditors, they will be more willing to work with you.
DO consult with an experienced bankruptcy attorney if you are considering bankruptcy as an alternative.
DO expect to spend considerable time and energy helping your bankruptcy attorney in completing your company's petition and schedules and representing your company throughout the case.
DO have your books and records in order prior to consulting with your attorney. You can lower your legal expense substantially by being organized and doing a lot of the "leg work" yourself.
DO have at least a preliminary idea as to what you expect a bankruptcy to accomplish for your company.
DO have realistic expectations regarding bankruptcy, and how it can help your company. If there is no demand for your product, bankruptcy reorganization won't help. Bankruptcy can't make your company profitable!
DON'T expect bankruptcy to cure all of your company's financial problems.
DON'T "forget" to list a creditor on your bankruptcy schedules. Whether intentional or not, the debt to that unscheduled creditor will not be discharged in the bankruptcy.
DON'T sell or transfer assets to your friends or relatives to hide them from creditors or the bankruptcy court. The trustee will ask you about such transfers at the first meeting of creditors, and has the power to recover those assets.
DON'T try to defraud the bankruptcy court. You sign your bankruptcy schedules under penalty of perjury, and you are under oath at the first meeting of creditors. If you fail to list property, omit material information or otherwise lie or cheat on your schedules or when testifying, your case will be dismissed when the court finds out about it. You may also be prosecuted for bankruptcy fraud.
Hire a Bankruptcy Attorney Today
Whether you are thinking about filing for bankruptcy or in the process of completing the petition, you'll want a legal expert to help you through the process. An experienced bankruptcy attorney will be able to answer your questions and help you understand what bankruptcy will do for your small business.