Business Bankruptcy: Hiring a Lawyer

Written by jessica Alba

In truth, the title of this article is rather misleading. Yes, you should have a lawyer, if you file for bankruptcy. However, as soon as you start having financial trouble with your enterprise, it is time to seek the services of a lawyer. The advice he/she has may help you avoid filing in the first place, or help you sidestep some very costly pitfalls. Either way, business bankruptcy and hiring a lawyer go hand-in-hand.

Valuable Advice

You may think you know the law regarding bankruptcy. But, you need to think again. The laws have recently changed, making it more complicated to file and effecting how you move forward after filing.
For example, if you pay one creditor within a certain amount of time before filing, the court can void the payment and redistribute the money to the various businesses to which you owe money. Countless details are involved in the process of filing and financial obligations. Thus a lawyer can help you circumvent the mistakes that many people make, who try to file a business bankruptcy on their own.

Thou Shalt Nots

When you visit a bankruptcy lawyer, some of the first things you will discuss is the things you should never do, especially if you are about to file for bankruptcy. You can get in a lot of trouble, if you take certain actions. So, you might want to think of them as the “thou shalt nots” of business.

1.   Postdated checks: NEVER try to satisfy a debt to a creditor with a check dated in the future. If the check should bounce, you could be charged with a crime and end up in jail. Even if you file for bankruptcy, you will still be in BIG trouble. The action will not save you from being brought up on criminal charges and prosecuted to the fullest extent of the law.

2.   Transferring Property: When you file for bankruptcy, every one of your assets and liabilities must be included in the process. More than one dishonest individual has tried to transfer property to a friend or family member, to protect it from future bankruptcy proceedings. In fact, nothing that is transferred up to a year before the bankruptcy is exempt from claiming as an asset. If you try to hide it from the bankruptcy trustee, (the person overseeing your case) you can be charged with fraud. Then, you will have more legal troubles than you can handle.

3.   Credits and Cash Advances: Be careful about spending money you do not have within 2 months of filing for a business bankruptcy. If you run up a debt of more than $1100, you will still be responsible for the amount you owe, even if you file bankruptcy. A good rule of thumb: if you do not have it, do not spend it.

4.   Play it Close to the Vest: If you are on the verge of filing business bankruptcy, now is not the time to volunteer any information or assets. Information you may have is on a need-to-know basis. For example, do not voluntarily offer to return any assets that may be a necessity later. Many people make the mistake of giving a car back, when they may need it to find employment and a way to support the family later.

Your Options

A bankruptcy lawyer will also be able to discuss your course of action, should you not be able to avoid bankruptcy. You will need to decide whether you should file chapter 7, chapter 11, or chapter 13 bankruptcy.

Chapter 7 bankruptcy basically gives you a clean slate. Most of your debts are totally forgiven and you get the chance to start anew. Chapter 13 is a reorganization bankruptcy. Under the terms of this legal action, the court will have to approve a schedule of reasonable payments to your various creditors.

In most cases, you have up to 5 years to get the new amounts paid off. The amount of your debt is generally lowered to an amount you can afford to pay, so you will have to adhere to the payment schedule the court orders. Thus, you still have financial responsibilities.

If you are in debt for more than $290,525, you will have to file chapter 11 bankruptcy, if you want to restructure your debt. Generally, it is the type of bankruptcy you will file, if you are a larger business. It is definitely a more complicated and expensive process. Oftentimes, it is almost impossible to satisfy such a large debt, and these businesses will ultimately end up converting to a chapter 7 bankruptcy.

No Way Out

Finally, an attorney will advise you what debts cannot be resolved in a business bankruptcy. No matter what you do to relieve your financial obligations, you will not be able to avoid:

•   Alimony or Child Support
•   Back Taxes
•   Student Loans
•   Government Fines and Penalties
•   Debts after Bankruptcy Filing

No matter how bad your financial troubles become, you are still obligated to pay off certain debts and obligations. Bankruptcy is meant to help you get a fresh start or have time to pay off creditors. It is not a means of negating your responsibilities.

In short, the information included in this article is only a tip of the bankruptcy iceberg. If you are thinking of saving money and filing without the help of a bankruptcy lawyer, you are only asking for trouble. If you are already in financial straits, play it smart. Hire a professional that knows all of the ins/out of business bankruptcy.