Considering a Bankruptcy Filing?
Mar 23, 2020
After the shutdowns and economic mayhem that has turned your once profitable business into a shell of its former self, can you simply file for bankruptcy, get a fresh start and move on with life?
If it was only that easy. Too often, companies file for protection only to be blindsided by the administrative burdens, intrusiveness, large costs and unintended consequences.
Here are some of the things to consider along with your Bankruptcy Counsel and Financial Professional that may have implications to the company’s success in surviving a bankruptcy:
- Small business often employ multiple family members, in addition, there is typically a liberal payment of personal expenses to owners and family members which can lead to:
- Insider claims for payments made years before the filing
- Reasonable compensation questions
- Preference actions
- 90 days prior to filing the company is deemed insolvent and is able to reclaim payments made to certain vendors
- Business plan
- Is there a go-forward plan?
- Are there income streams to protect, that can provide a foundation for a reorganized company
- Is the business insolvent?
- The implication for fraudulent conveyances and insider claims
- Tax issues
- Pass-through losses
- Cancellation of debt
- Tax attributes
- Delinquent taxes
- Are all the properties you own or lease necessary?
- Personal guarantees
- Even if the business filing is successful, will the creditors pursue you personally?
- Existing legal issues
- Bankruptcy will put a hold on most litigation
- Are there critical single-source vendors?
- Reclamation claims-the vendor may be able to reclaim goods sold on credit
- How will you retain them and pay their salary and benefits
- Union concerns
- Secured lenders
- Use of collateral during the process
These are just some of the issues that need to be considered before you file for protection. How well you handle them may determine your success in bankruptcy.
Insolvency Bankruptcy and Receivership Services