Commercial bankruptcy can be an overwhelming and complex process. When you own a business, you put a lot of into it. You have likely contributed much of your own savings into it, you have probably put most of your free and business time into the improvement of it, and you may have a loan out on the business, as well. Bankruptcy threatens more than your business. It can also threaten your residential property, your families? savings, and your ability to keep the business. If you are going through bankruptcy issues, it is important to work with experienced corporate compliance programs and a knowledgeable bankruptcy attorney.
Ensure bankruptcy is your only option
Bankruptcy may be your only option. However, it may also not be your only option. Bankruptcy is very difficult to return from, if you intend on keeping your business and turning it into a profitable one. Some bankruptcies result in requiring you to sell your business to the highest bigger, or to sell off all of your assets, making it extremely difficult to return from. If your goal is to turn around the business, consult with your corporate compliance programs on your options, and a bankruptcy turn around plan.
Evaluate different types of bankruptcy
There are also different chapters of bankruptcy available. Each of these chapters has different advantages and disadvantages. Choosing the best one for your business needs and goals will depend on the professional consultation services of your corporate compliance programs and bankruptcy attorney. The most common type of bankruptcy for smaller businesses, however, is Chapter 11. Approximately 90% of chapter 11 debtors have less than $10 million in assets or liabilities, less than $10 million in annual revenues, and 50 or fewer employees.
Consider all debt in bankruptcy
Businesses acquire a lot of debt, especially in a bankruptcy case. Consider all of your debt that will be rolled into the bankruptcy case. Otherwise if you forget a specific vendor, they can still come after you financially. They also can choose to stop service, which can be especially troublesome if you are still operating your business during the bankruptcy claim. Most bankruptcy judges will put a stop on vendor payments and require service, until the terms of the bankruptcy mediation are established.
It is also likely that your bankruptcy will be settled relatively quickly. If it were to go to federal trial, it could take many years. However, the number of cases that are settled pretrial has increased drastically over the years. In 1962, 11.5% of federal civil cases went to trial. Today, experts say the percentage of civil cases that actually reach trial in the Federal courts is estimated to be about 1%. Settling pretrial usually involves finding a good bankruptcy solution with the corporate compliance programs.
Avoid new commercial contracts during bankruptcy
Most bankruptcy judges will prohibit signing of new contracts or business agreements during bankruptcy. Even if your bankruptcy judge does not, it is important not to. Entering into a new business contract during bankruptcy can severely complicate matters. The bankruptcy can be pushed back, costing everyone more money. It can also leave the new contractor out of the bankruptcy, requiring you to make additional payments to the new commercial vendor. The case may also be forced into alternative dispute resolution arbitration, making the process even longer.
Special bankruptcy ownership
Sometimes a business is made up entirely of intellectual property or a patented idea. If you are going through the bankruptcy process, you will want to carefully monitor the terms of the bankruptcy. If you sign away the business, for example, you could also be signing away your patent to a product or a copywright that is necessary to make your business successful. You may have to take the case to a judge in the copywright and patent law specialty.
The bankruptcy process is an important legal tool for businesses to pull themselves out of financial trouble. However, it requires many months of information gathering and consultation with a legal professional. You will want to evaluate all aspects of your business and the outcome of the bankruptcy before deciding to go this route.