Bankrupt! 7 Things Business Owners Need When Filing For Bankruptcy

There is no tougher time for a business than when it is facing its own potential failure. At such a stressful time, it can be difficult for a company owner or manager to know how to best proceed, and of all potential legal hassles, bankruptcy has one of the loudest ticking clocks. So, what are some things you and your company can do to prepare for a bankruptcy filing?

Bankrupt! 7 Things Business Owners Need When Filing For Bankruptcy

Accountant

Your top priority is to sit down with your accountant and go over every detail of your company’s finances and your personal finances. If you have investors, shareholders or minority owners it is important to obtain their records as well, at least as they relate to the business. This is a step you absolutely cannot overlook. Going into a bankruptcy without an accountant is just asking for problems.

Attorney

When you file, you will want an attorney on your side who specializes in bankruptcy filings. You should also try to find an attorney from a firm like Lazaro Carvajal who has argued before your district bankruptcy court before as well. This will save you time and trouble when your case reaches the courtroom, because your attorney will be familiar with the judge’s procedures. You should also insist your accountant and attorney work closely together as often as possible.

Tax Documents

Get all of your tax documents. Every last scrap of paper. Not only are they going to be required, but they are the best evidence you have of your financial transactions for past years. If at all possible, subpoena what records you can from all your vendors and your bank as well. This information will be vital to your case eventually.

Contact your Creditors

The more of your creditors you can get on board before you file, the less expensive the case will be. If you can get them all, you might even be able to file what is known as a “pre-packaged” bankruptcy, which will help you avoid all kinds of hassles down the road.

Debtor-in-Possession Financing

Check with your attorney first, then go to your bank right away and apply for a “Debtor in Possession” loan. This will help keep your company going during the case. These loans are traditionally very popular with banks because they are almost always senior to all other financing and are the likeliest to be paid in full. Your attorney will likely be in full support because these funds are likely to be paid as his or her fees.

Don’t Become a Creditor

As tempting as it might be, under no circumstances should you buy back your own debt, even if you pay 100 cents on the dollar. This puts you in the position of being your own creditor and can cause credibility problems later in the case. The whole point of a bankruptcy is to take advantage of the orderly processes of the court. Let the judge do his or her work.

Don’t Make Side Deals

Everything goes to the judge in a bankruptcy case. Don’t hide assets. Don’t play games. Under no circumstances should you make a side deal with a creditor during the case. Not only is this illegal, it can get your case dismissed. A dismissed bankruptcy can get really ugly and destructive. Don’t make this mistake.

A fair amount of planning ahead is important here. At the same time remember your preparation is what will get you the best outcome. Take your time and do it right and you’ll be better off in the long run.

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