Filing for bankruptcy is a last resort, and the decision to do so is often painful. As uncomfortable as a business owner may feel about filing, it is important to take the proper steps. Among those steps is meeting with a business bankruptcy lawyer. When you find a lawyer to meet with, make sure you have a few questions to ask first. You want to make sure you have an open line of communication.
Here at Delancey Street we are a business debt settlement company. We are not a law firm, and when bankruptcy is the better path we refer owners to independent bankruptcy counsel. We tell owners to make sure they get the answers they need and make sure the answers are legitimate so they don’t end up with a result they didn’t expect. Whether your business is in central Pennsylvania or anywhere else, these are the eight questions we would want answered before you sign.
The first question is whether bankruptcy is really your last option. Ask it at the first meeting. Bring all of your business paperwork, bank account information and personal asset information to the initial consultation, along with your debts, income, taxes and goals for the future, and ask if bankruptcy is even a relevant option. Get an overview, but understand the level of detail with which you will have to supply information. While you may not need all of this information, your lawyer will know what documents are necessary. Will this meeting take an hour? Probably not; you may need a few sessions to discuss all the details.
Second, ask whether there’s an alternative to bankruptcy, like a settlement or debt consolidation. You may be able to work out a deal with creditors and pay less to reach a “settlement” or restructure your debt through debt consolidation. A lawyer can explain the pros and cons of each option to help you make the right decision for you. Sometimes he or she can advise you that other alternatives may be better. But when it comes down to it, the decision is yours.
Fee Structure
Third, ask what it will cost. There are no government-set fees for this work, and what an attorney charges depends on the value and complexity of the case. So they can cost a lot, or not too much. Check what a few firms charge online, and talk to friends who’ve done this, and to other small businesses in your neighborhood. What did they pay? Ask what you should expect to pay, including any ancillary costs that may be involved.
Fourth, ask how the fee is structured. Some firms charge on a project basis; others take part of the fee as the case progresses. How is the fee structure built? What’s included in the fee? Are there any additional costs that the client will be responsible for, and how much are they likely to be? Ask for the standard fee structure before signing, and make sure it’s in writing. If you sign an agreement that does not clearly state how the fee is assessed, you could be in for an unpleasant surprise.
What You Can Protect
Fifth, ask what you can protect. Your car, your house and other assets can sometimes be saved in a filing, and it helps if your attorney knows what matters most to you. So before the meeting, think about which assets are most important to you and your business, and figure out what you are willing to sacrifice. This information can help your attorney determine whether you can keep your assets. It is important you know what you can, and cannot, keep. No matter how much you really do not want to lose, make sure you still ask. The answer will also shape which chapter the attorney suggests.
Sixth, ask which chapter fits. Remember that several bankruptcy options are available to business owners; the right chapter for a business owner depends on the unique circumstances of the case. From Chapter 7 to Chapter 13, each protects the debtor in its own way. Chapter 7 can protect a car, a house and other assets up to a certain limit. Chapter 13 allows debtors to reorganize their debt and repayment plans over 3-5 years, and may do more to shield your future goals.
The Consequences of Filing for Bankruptcy
Seventh, ask the lawyer about the consequences. As he or she sees it, what are the consequences of filing for bankruptcy? What are the positive and negative aspects? Debt relief and protection from creditors are on one side; a damaged credit score is on the other. So ask for a list of things that can go right and things that can go wrong. You need a clear picture of what the worst possible case is and what the best possible case is. And you need to make your decision based on that.
Eighth, ask how long it will follow your credit. A poor score can block new credit after a filing. How much damage can be expected and for how long? Can you do anything to restore it? This is a question worth answering. Ask your lawyer how long that filing will stay on your credit report, and what strategies he or she knows of to help you recover from the filing.
Whatever you ask, don’t hide anything in return. Lying to a lawyer is not going to solve your problem; doing so might actually make it worse. Write down anything that might be confusing to you, and in your next meeting, ask for clarification. Experienced lawyers have clear answers, and whether your case ends in court or out of it, the goal is to keep your business running and your debt under control. At the end of the day, maybe filing for bankruptcy was the best option. Maybe it was not. Hire a lawyer that can give you the honest advice you need to take action now.
