Since 1990 we’ve filed many small business bankruptcy cases. Statistically, the majority of small businesses fail within a few years and so, unfortunately, many fail. Even those that have been in around for decades can fail. A minor shift in the economy can leave a small business owner wondering why the phone has quit ringing all of a sudden.
A common thread is that most owners of small businesses have personally guaranteed the business debt. It might be a large business with many employees, lots of equipment/ inventory subject to an SBA loan or other secured lines of credit . It might be a “mom and pop” outfit with a few credit cards in the company name. We can help with either. Because of the personal guarantees the vast majority of small business owners are looking at a minimum a personal bankruptcy filing in order to discharge that debt. We may consider a business filing as well. There are a couple of schools of thought on that. Some attorneys say they’d never file on a business and let the creditors chase their tails going after a busted business with no assets. Other attorneys would say it makes sense because even if there are no assets the owner as the business “principle” will be harassed by creditors with lawsuits and the discovery process in order to discover the whereabouts or disposition of the company assets. There may well be no assets left but the creditors don’t know that and so they continue to try and collect any way they can. In that case, filing on the business would make sense. People with a high tolerance for stress may chose to deal with those business creditors on their own. In our experience many people want a clean break and so they’ll hire us to file a business case for them along with the personal case. A third option could be hiring a lawyer to fend off their business creditors short of filing a business bankruptcy case in the hopes they would see the light and move on to greener pastures. We can provide that as well.
Whatever the situation there comes a time when it is wise to consider your options in bankruptcy. Usually people contact us once they start getting sued. That’s okay, but even before that might happen if you find yourself draining your personal savings, your pension, mortgaging your house and racking up all kinds of debt to try to stay afloat and you’re still not seeing daylight then you have to take a real hard look at your business. It may not be salvageable. We understand that’s a hard thing to have to admit. Let’s face it…small business people work long hard hours and put blood, sweat and tears into their business. Maybe it’s not a bad model but the economy just isn’t right. Maybe it was and a dip in the economy or the public’s spending patterns are just killing you. Perhaps you expanded your business beyond what it could carry and if you retrenched somehow you could make it but just can’t right now because of the burden of debt it is carrying. There are options. It could be that shutting it down is the thing to do and just walk away. Perhaps negotiating new terms with your creditors is a good option. It might be wise to close the old business and open a new one…new name, new corporate entity, new opportunity…..without that deep dark black hole of debt. Every business is different. We can help you assess whether a bankruptcy filing makes sense for you or for your business.