If your business has racked up so much debt that you’re thinking about making the difficult decision to file for bankruptcy, don’t hesitate to consult with an experienced business lawyer first. A lawyer can properly advise you about what happens when you file for bankruptcy, so that you know exactly what you’re getting into.
Once you’ve talked to your lawyer and decided that bankruptcy is the way to go, there are a few important facts you need to be aware of.
Your lawyer will certainly help you with the bankruptcy petition, and ensure that the relevant schedules are submitted. Once that’s been done, here’s what happens.
- All your creditors will be notified. This means that they can no longer make any attempt to collect outstanding debts. Your business lawyer will give you all the details about how this automatic stay will protect you.
- A local bankruptcy trustee will be appointed by the US Trustee Program, with responsibility for administering your case and supervising payments to creditors.
What happens next will also be dependent on the chapter of bankruptcy you file. This should always be done on the advice of your business lawyer. Your business lawyer will advise you to file bankruptcy under Chapter 7, 11 or 13, depending on your situation.
If you filed under Chapter 7 on the advice of your business lawyer, the trustee will then sell property that was deemed non-exempt. You will again have to rely on the expertise of your business lawyer, to explain the exemptions available based on the state in which you live. Proceeds from the sale of non-exempt property will be used to pay your creditors.
If you are a sole proprietor and your business lawyer directs you to file under Chapter 13, payments to creditors are handled somewhat differently. The property is not sold, but the debtor is required to make payments on a monthly basis to the bankruptcy trustee, who then forwards the relevant funds to creditors.
Limited liability companies, partnerships, and corporations are normally required to file for bankruptcy under Chapter 11. Your business lawyer will explain that, under these circumstances, you are not personally liable for the debts of the business, as is the case with a sole proprietorship. However, your business lawyer will help you file the obligatory written disclosure statement, which provides details of the financial affairs of your company. The company also has to submit a reorganization plan along with the disclosure statement. The business lawyer can oversee this process to make certain that the required information is provided to the court.
Filing for bankruptcy can be a scary and overwhelming experience. That’s why it’s so important to have an experienced business lawyer to guide you through the process.