The Best Bankruptcy Advice: Get Legal Advice
Businesses considering bankruptcy get intense legal advice before filing. You would also be smart to get solid advice to make a good decision.
What Businesses Do Before Filing Bankruptcy
The following are just a few of the companies which have filed business bankruptcy in the last couple months:
Pier 1 Imports
CMX Cinemas
J. Crew
Gold’s Gym
Neiman Marcus
JC Penney
Hertz
Tuesday Morning
Some of these companies will completely go out of business, some will continue on after a financial restructuring.
What they all have in common is that they got lots of legal advice before deciding to file bankruptcy. They likely got that advice over the course of many months. They likely used that advice to try to avoid entering into bankruptcy, take steps to position themselves for filing, and then to time the filing as well as possible.
If Bankruptcy Is Even a Possibility, Get Immediate Legal Advice
That likely applies to you if you are reading this. If there is even just a chance you need to file bankruptcy, you should get legal advice for similar reasons. You would be wise to get legal advice to find out:
if bankruptcy is the best option for you, and how to pursue other alternatives
how Chapter 7, 11, 12, and 13 work, and whether either are right for you
what actions you should take to position yourself for either a possible or definite filing
what you should avoid doing
the best timing for your bankruptcy filing
1. Bankruptcy or Other Alternatives?
Bankruptcy may feel like an option of absolutely last resort. Sure, it’s something to avoid when possible. But that doesn’t mean you should avoid finding out about it.
Bankruptcy is a tool. It’s a legal tool provided for in the U.S. Constitution (Article I, Section 8, Clause 4) and federal law to provide you financial relief.
It may be right for you, either now or at some point in the near future. Or it may not be. You would feel better knowing one way or the other.
2. The Different Chapters of Bankruptcy
Chapters 7, 11, 12, and 13 are each very different. They are designed for very different circumstances.
If you own a business, generally Chapter 7 is for closing down your business, Chapter 11 is for reorganizing it. Chapter 12 is essentially a Chapter 11 for farmers and fishermen.
If you are instead of consumer debtor your two options are usually either Chapter 7 or Chapter 13.
Chapter 7 is sometimes called “straight bankruptcy.” It takes only 3-4 months, usually you keep what you own and can “discharge” (legally write off) most debts. But Chapter 7 is very limited in how it deals with certain important debts. With secured debts (home mortgage and vehicle loans) you either keep current or lose the house/vehicle. Also, Chapter 7 doesn’t help much with debts that you can’t discharge, like recent income taxes, child/spousal support, and such.
Chapter 13 “adjustment of debts” is much more flexible, especially with secured and other special debts. But it takes much longer—usually 3 to 5 years. That extra time is what provides much of the flexibility. You and your bankruptcy lawyer put together a payment plan, mostly for dealing with the secured and special debts. There’s a plan approval process and then you pay according to the plan for as long as it lasts. Chapter 13 can often give you tremendous power over your secured and special debts.
In relatively straightforward situations, Chapter 7 provides immediate and lasting financial relief. In situations with more diverse debts, Chapter 13 also provides immediate, and more flexible and powerful relief with those debts especially.
Interim Conclusion
More on what to do, what not to do, and the timing of bankruptcy coming up in our next blog posts. In the meantime…
As bankruptcy lawyers, we are genuinely in this to help people. We love it when we can provide real solutions for our clients’ serious financial dilemmas. So it’s sad when people come in to see us who would have significantly benefitted from coming in earlier.
Please get in touch with your bankruptcy lawyer as soon as bankruptcy becomes a possibility. Doing so will give you the peace of mind that comes from
knowing that you have some really helpful options, often better than you thought
learning how to either avoid bankruptcy or position yourself in the best way for it
establishing a trusting relationship with your bankruptcy lawyer
knowing that you are avoiding taking seemingly sensible but actually unwise actions
taking charge of your life instead of living in fear
There is no downside for getting legal advice when you’re hurting financially. The initial consultations are almost always free. It may well be the single best decision you could make now.