It’s not uncommon for business owners to encounter unforeseeable problems. Owning a business is a risk. Business owners considering bankruptcy often find themselves dealing with the psychological factors, considering alternatives, and trying to understand the process. This article summarizes these areas.

The Psychological Toll

Often the thought of filing bankruptcy triggers anxiety, stress, and sometimes shame or anger. This is natural. Virtually nobody is experienced in bankruptcy until they have gone through it, so it is no surprise they have not developed the knowledge and experience to navigate this process.

No one sets out in life with the goal of filing bankruptcy. Bankruptcy is the result of circumstances outside of your control. Common circumstances include unexpected health/medical issues, problems within a business, economic changes, or other unplanned events.

Understanding your options can help to reduce the stress and anxiety. Working with a knowledgeable and experienced attorney can eliminate the pain and empower you to make educated choices to come out the other side of bankruptcy in the strongest position.

Individuals and business owners often do a Chapter 7 or Chapter 13 bankruptcy. Although Chapter 11 bankruptcies are used for large public companies, Chapter 11 bankruptcies are rare for small or privately-owned companies.

Alternatives to Bankruptcy for Business Owners

Bankruptcy is one potential solution to overwhelming debt, money, and legal issues. Another option may be a workout or turn-around. A workout or turn-around is like an informal Chapter 11 bankruptcy: you work with creditors in a plan to turn the business around. This article summarizes some of the issues related to small business bankruptcies and workouts.

Company Debts & Liabilities

It’s no surprise that many companies encounter serious debt issues. Companies take daily risks, markets are ever-changing, and sometimes unexpected problems arise.

CEOs and business owners may feel like the room is closing in around them:

  • banks freeze the company’s line of credit,
  • creditors intensify their collection efforts,
  • lawsuits are commenced, or
  • garnishments, levies, and foreclosures occur.

Turnaround experts and attorneys experienced in complex business problems provide an unemotional, logical perspective to identify a path through the chaos. A variety of legal tools are available to hold off creditors while the company gets back on track.

Business Turnarounds

Business turnarounds turnaround experts helping the business get back on its feet, salvaging the value in the company, and making tough decisions to return health to the business. This often involves meeting with creditors to explain a turnaround strategy and repayment plan.

Basics of Business Owner Bankruptcy

The purpose of bankruptcy court is not to punish the debtor but rather to release the debtor of liability.

Federal court has jurisdiction over bankruptcy cases, and debtors rarely appear in court. However, debtors are required, under rule 341, to attend a meeting between debtors and creditors in order to evaluate the debtor’s assets. This is often referred to as a 341 meeting.

Companies filing bankruptcy generally use Chapter 11 to seek time to reorganize. This allows the company to get back on its feet and establish a plan to repay creditors over time.

For business owners (as individuals), there are three basic types of Bankruptcy in the Bankruptcy Code:

  • Chapter 7 bankruptcy deals with the liquidation of one’s assets in order to distribute payment to creditors.
  • Chapter 11 bankruptcy concerns businesses that must reorganize in order to continue operating while paying off its creditors.
  • Chapter 13 bankruptcy is where an individual must adjust their debts in order to keep their assets while still paying off creditors over time.

These chapters also provide many different methods for paying off your debts so you can move on with your life.

Business Owner Bankruptcy Services

Here is a list of bankruptcy services and issues that can be resolved during the bankruptcy process:

  • Alimony and child support
  • Alternatives to bankruptcy
  • Assets and exemption
  • Automatic stay
  • Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)
  • Completing the bankruptcy petition
  • Compliance requirements for small businesses
  • Credit card debt
  • Creditors rights
  • Debt discharge
  • Debt restructuring
  • Debtors rights
  • E-discovery and computer forensics in bankruptcy cases
  • Insolvency
  • Interest rate disputes
  • Internal Revenue Service (IRS) tax debts
  • Litigation in the bankruptcy court
  • Mandatory credit counseling and debtor education
  • Means test
  • Mental health and addiction issues
  • Predatory lending claims and bankruptcy
  • Preparing and attending the 341 meeting of creditors
  • Reaffirmation agreements
  • Real estate bankruptcies
  • Representing trade creditors
  • Schedules A,B,C,D, & F
  • Second lien lending
  • Statement of affairs: discharge and dischargeability
  • Taxes during bankruptcy

Bankruptcy Lawyer Credentials

Attorney Aaron Hall represents Minnesota companies and business owners facing complex financial problems. Aaron has represented clients in turnarounds, negotiating the release of debt (workouts), and filing for bankruptcy.

Aaron is admitted to practice in the United States Bankruptcy Court in the State of Minnesota, the Minnesota Supreme Court, the Minnesota Federal District Court in the State of Minnesota, the Minnesota Court of Appeals, all Minnesota State District Courts, ADR forums, arbitration, and mediation.

Bankruptcy and Alternative Options

An experienced bankruptcy attorney can help you determine which option is best for you, including the following areas:

  • Personal bankruptcy
  • Business owner bankruptcy
  • Business bankruptcy
  • Chapter 7 bankruptcy
  • Chapter 11 bankruptcy
  • Chapter 13 bankruptcy
  • Pre-bankruptcy workouts with creditors (debt negotiation)