Nobody wants to think about bankruptcy. But sometimes a business owner has no choice. If you’re running your company day to day, it’s hard to tell when a bankruptcy filing makes sense - or when it’s time to call a lawyer. A lot of business owners deny their situation, or push through hoping things will eventually get better.
Delancey Street is a business debt settlement company, not a law firm. We speak for business owners to work out deals with Merchant Cash Advance funder companies, lenders, and other business creditors for less than the full balance owed. Where bankruptcy is the right choice, we refer the owner to a vetted outside attorney, and the attorney-client relationship exists between the owner and that outside attorney alone. Before you call a Naples bankruptcy lawyer, you’ll want to understand all of these points, because they help determine whether Chapter 11 is the right path or whether you should go under a different chapter or not file at all.
How Your Business Was Formed Matters
The first thing to know is that how your business was formed matters. If the business is a corporation or an LLC, you might not have to file bankruptcy. You can just close the doors if things are bad. The courts can’t get at the owner’s personal assets in most cases, and the owner can escape personal liability. Some things have to still get paid, but the business isn’t forced to keep operating in the red.
Second, that protection only holds if you kept the money apart. If you mix business with your personal money, you don’t get the benefit of the company. The court will merge your personal finances with your company’s, treating the two as one entity. It is easy to mix personal funds with your business funds. But mixing them up can create legal complications. So act separately with your finances.
Third, ask whether your creditors can reach your personal assets. Whether you should file will depend in large part on whether your creditors can go after your personal money and possessions. If they can, you may want to file. As QuickBooks says, bankruptcy might be a good way to protect your assets - like your house - if your business fails. Which chapter to file can be complicated - it depends on state law and a bunch of other factors. There are several different kinds of bankruptcy, called chapters, and one of them may be a better choice for you than the others, depending on your situation.
Fourth, the chapter you choose depends on your situation. If you’re a corporation or an LLC, you’re limited in what you can do. But your attorney should go over all your options with you, and at least give you a feel for what they are. Take Chapter 7. When you’re a sole proprietor, you have to file Chapter 7 on your own name. Your business debts will be part of the case, as will your personal ones. (This goes for people who run LLCs or corporations but who mix their money with their business’s money.) You will have to liquidate and sell the business to pay it off. Chapter 13 is narrower. Corporations and LLCs can’t file Chapter 13. That chapter is reserved for sole proprietors. You have to come up with a plan to pay back some of your debt.
Fifth, be clear about what Chapter 11 actually does. When you consider the effort that it takes to build your business, it is natural that you want to keep it going if it is hit by economic hard times. Chapter 11 is designed for that situation. Under Chapter 11, the company carries on, paying back its debts over time. Creditors vote on the repayment plan, and none of the debts are forgiven. It’s not free money. That doesn’t mean, however, that you can’t arrange a more convenient repayment schedule.
Sixth, don’t underestimate the process. Bankruptcy is a complicated and often time-consuming process. You have to know a bunch of rules, and you have to observe a bunch of technical requirements. An experienced lawyer will know what to do to get the petition filed and the case presented properly before the judge.
Seventh, know the steps. You make sure you have your financial stuff ready for review before you file. You get credit counseling; the point of that is to make sure this is the right thing to do. Then you file a petition with the court and start a long court process in which you’ll have to file a lot more documents by a lot more deadlines. Your lawyer’s knowledge of bankruptcy law, of the right type of bankruptcy, and of the filing process is crucial if you’re going to get through your case smoothly. Bankruptcy can feel scary. And you can feel like you’re getting lost in the fog sometimes. Good representation can help make this whole process more orderly. And more reassuring.
Which brings us back to where we started. Hiring a Chapter 11 attorney in Naples is not the same thing as filing Chapter 11, or making sure that Chapter 11 is right for you. A good one is a professional advocate for you who can help you make decisions and understand the process. You’ll want an experienced attorney who knows what they are doing.
At Delancey Street, a first consultation is free and confidential, and if a cheaper option exists, we say so on that call. When the debts have gone beyond any chance of settlement, we’ll suggest that you consult with an experienced bankruptcy attorney. You can do the research and the comparisons, if you like. Or we can put you in touch with one who has been vetted by us.
