Ten Things to Think About Before Filing for Bankruptcy
If your business is struggling with staggering debt and you can't meet your financial obligations, bankruptcy may be your only option. Through bankruptcy, you may be able to eliminate all or some of your business's debt load and figure out how to handle creditors.
A bankruptcy attorney can advise you on debt relief options -- including Chapter 7 debt discharge plans, Chapter 13 debt repayment plans, and Chapter 11 reorganization. An attorney can also give you peace of mind, something that you can't put a price tag on.
Factors to Consider
Below, you will find a list of ten things you may want to think about before filing for bankruptcy.
- Is bankruptcy really necessary? You (or your attorney) may be able to negotiate an out-of-court solution or "workout" with your creditors.
- Do you need a lawyer? Although attorney representation is not required by the Bankruptcy Code, most businesses will be much better off hiring an experienced bankruptcy lawyer. The bankruptcy lawyer can help you make the best decision regarding whether to file for bankruptcy (and which chapter is best for your company) and can also guide your company through the process. This is especially true in Chapter 11 proceedings, which can be extremely complicated.
- Do you want to close your business or do you think you can operate on a profitable basis in the future? The type of bankruptcy your company files depends, in part, on the answer to this question.
- If you want to continue operating your company, do you have a realistic plan as to how your company will return to profitability?
- If you want to continue to operate your business, do you have the money to pay your bankruptcy attorney? Chapter 11 is expensive. Talk candidly with your attorney about the costs of filing a Chapter 11 case.
- If you want to continue operating your business, is existing management capable of operating the reorganized company? You may need to hire a "turn around" consultant to satisfy your creditors if they think that existing management is not competent.
- Are some or all of your company's debts guaranteed by you or others? If so, a bankruptcy filing does usually not stop collection activities against the guarantor(s) or cosigner(s).
- Do you need immediate relief for a particular problem, such as foreclosure, repossession, garnishment, eviction or utility shut off?
- Are you willing to expose your company to the court and to creditors during the bankruptcy process? There is no privacy in a bankruptcy proceeding.
- Are you willing to comply with the many restrictions of operating a business in bankruptcy? Although you will be able to operate your business, you will be required to ask for court approval of anything that is not in the ordinary course of business.
After reviewing these ten bankruptcy questions, you may have decided you need expert legal help. Visit FindLaw's Lawyer Directory to find a skilled bankruptcy attorney in your area now. Bankruptcy lawyers will be able to answer your questions, help you file, and even represent you in court.