What to Know About Small Business Bankruptcy

Navigating the Legal Maze: Small Business Bankruptcy and the Need for Expert Counsel

Filing for bankruptcy as a small business owner can be a path that no one wants to travel. Once opening the doors you never believe that you would find yourself in this place. It can be a very complex process and going about it alone could do more harm than good. This is where obtaining an experienced attorney is very important for not only you but all involved.

It is very possible to tackle the process by yourself but it may not be easy. It will require a lot of dedication and focus. Other than that you also want to make sure you have helpful individuals around you that you trust. At a glance, these are the steps needed for a small business to file for bankruptcy if they choose to do so themselves;

1. Assess Your Financial Situation: This is where you assess the business and decide if bankruptcy is right for you.

2. Consult with a Bankruptcy Attorney: Speak with a qualified bankruptcy attorney who can help answer some of your questions.

3. Choose the Right Bankruptcy Chapter: Choose between Chapters 7, 11, or 13.

4. Prepare Bankruptcy Petitions and Schedules: These cover multiple items so that you can present your financial situation.

5.File Bankruptcy Petition: File documents with the appropriate court.

6. Automatic Stay: Helps to halt creditors from action.

7. Attend Meeting of Creditors(341 Meeting): Creditors ask questions about business affairs.

8. Development of a Repayment Plan(Chapter 11): Structure a plan to pay back what is owed.

9. Comply with Court Requirements: Throughout the process, there will be actions to abide by.

10. Financial Management and Reporting: If filing Chapter 11, implement financial management practices.

11.Obtain discharge or Confirmation: For Chapter 7, you may receive a discharge. For Chapter 11, confirmation of reorganization plan.

This process can be very tedious and everything must be detailed and accurate. When a small business owner decides to file on their own, there could be some steps missing in that process that could make the filing unsuccessful. Below are only three of those;

  • Making Luxury Purchases on Credit within 90 Days before Filing: The creditor would usually fight the discharge of these items.
  • Getting Married Right Before Filing Bankruptcy: The debtor may find themselves having to change the Chapter of the filing.
  • Filing the Wrong Type of Bankruptcy: The debtor could lose valuable property.

And the list of mistakes really could go on. Bankruptcy law has an array of chapters and procedures that have to be fulfilled. Making your way through it all requires expertise to avoid any pitfalls and mistakes.
Attorneys can help take the headache away with their legal expertise. Many specialize in the field so in most cases they have already seen the issue before. They also help you with creditors by protecting and negotiating with them. They will also make sure you get the maximum benefits so you leave nothing left on the table. Doing the bankruptcy process yourself is a possible route but obtaining an experienced bankruptcy attorney is the better option.