Ganje Law Office

Archive for January, 2010

If you’re considering bankruptcy for your business, you’re sure to have tons of questions. That’s why we’ve compiled answers to the most frequently asked queries about business bankruptcy to help you make informed decisions!

The world of corporate bankruptcy law can be complex and intimidating. Don’t let confusion get in the way of making the best decisions for your company: read on to get answers to the most commonly asked corporate bankruptcy questions.

Q. What is bankruptcy?

A. When a business has financial liabilities that exceed their assets or is unable to meet financial obligations, that company is insolvent—unable to pay their creditors, the company must come to an agreement with their creditors regarding payment or file for bankruptcy protection. This judicial solution gives the courts the power to settle the company’s debts.

Bankruptcy proceedings can be initiated by the debtor or by the creditor (called an involuntary bankruptcy). Filing a bankruptcy petition affects all of your creditors including:

• Secured creditors (those with a lien on your property)
• Unsecured creditors (vendors, credit card companies and others without a security interest in your property
• Judgment creditors (creditors who have sued and obtained a judgment against the debtor prior to the bankruptcy filing)
• Creditors with super priority claims (those with priority over other creditors because of special rules within the bankruptcy)
• Creditors with administrative claims (creditors such as accountants or lawyers with priority because of their assistance in the bankruptcy filing)

Q. What does filing for bankruptcy mean for my business?

A. Filing a bankruptcy petition simply starts a legal proceeding, with no guarantees regarding the outcome. That is to say, the debtor will present evidence of its insolvency, but there is no guarantee that the court will declare them bankrupt. This statutory process gives creditors and other parties the opportunity to challenge the debtor’s allegations and object to the relief being sought by the debtor.

Filing for bankruptcy does immediately put into effect an “automatic stay,” an injunction that stops creditors from trying to collect their debts until the bankruptcy court rules. This stay is issued against all creditors upon filing a bankruptcy petition. The automatic stay is designed to give debtors temporary relief from their financial obligations, giving them the breathing room to figure out how to deal with their debts.

If the courts declare your company bankrupt, then a settlement will be worked out with your creditors to satisfy all or part of your debts. Depending on the bankruptcy chapter you filed under, different rules apply.

Q. What is a business workout?

A. A business workout is a non-judicial resolution of your company’s financial obligations. Business workouts are settlements between a company and its creditors that satisfy the businesses’ debts, enabling it to continue operation. Also known as bankruptcy prevention, these arrangements are made outside of the court system.

While it may be surprising that creditors are willing to participate in business workouts, they’re more likely to receive greater compensation for their debts if your company does not file for bankruptcy. Using an alternative to corporate bankruptcy proceedings benefits creditors as well as the debtor, because some, or even most, of the debt will not be repaid under a bankruptcy proceeding. Secured debt, unsecured debt, and tax debts can all be resolved as a part of a workout.

In today’s economy, more and more business owners are facing the prospect of bankruptcy. If your company is struggling financially, there’s a lot you need to know before filing for bankruptcy.

Financial difficulties can make running your business next to impossible—if you’re facing the prospect of filing for bankruptcy protection, there’s a lot you need to know!

Bankruptcy May Not Be Your Only Option

Even when debts are piling up and creditors are harassing you and it seem like there’s no end in sight for your money woes, corporate bankruptcy may not be your only option. There are non-judicial solutions, including workouts and turnarounds, that can be used to satisfy your business debts without declaring bankruptcy. These bankruptcy prevention strategies may be right for your company, so contact your local bankruptcy attorney for specific advice about your particular situation.

You Need a Bankruptcy Lawyer

Filing for bankruptcy without an attorney may seem like a great way to save money, but this plan is likely to backfire in the long run. Keep in mind that your bankruptcy lawyer is a professional with years of experience dealing with the complexities of bankruptcy law. As an expert, he or she has the knowledge and expertise you can rely on to successfully guide you through the bankruptcy proceedings. While it may feel like you’re all alone when your company is in dire financial straits, hiring a corporate bankruptcy attorney means you’ll have a pro on your side! Whether it’s helping you develop a viable alternative to bankruptcy or arguing your case in the courtroom, your business bankruptcy lawyer will be an invaluable asset to your company.

Bankruptcy Should Be a Last Resort

At first glance, bankruptcy may sound like a great idea if your company has financial problems: freeing you from unmanageable debt, bankruptcy protection does have a glimmer of allure. But bankruptcy should not be entered into lightly! In the case of filing a Chapter 7 bankruptcy, your company will be liquidated to satisfy your creditors, eliminating the business you worked so hard to build. Even with bankruptcy filings that don’t dissolve your company, you’ll be saddled with the social stigma of the bankruptcy, creating complications down the road. Bankruptcy can be a resolution for your insolvency issues, but be sure it’s your only option. Your bankruptcy attorney can provide specific advice and guidance, so contact them today

Bankruptcy is a term we hear all the time but don’t necessarily understand. We’ve put together a brief overview of business bankruptcy in the US to help you understand the meaning and consequences of corporate bankruptcy in today’s down market.

With today’s tough economic situation, we’ve been hearing more and more about business bankruptcies in the news. But what exactly is bankruptcy and what does it mean when a business says it’s filing for bankruptcy.

Bankruptcy is a legal filing that enables struggling businesses to resolve issues of insolvency. Generally caused by a lack of cash flow, filing a bankruptcy can be initiated by the business or by its creditors (called an involuntary bankruptcy). Once a bankruptcy case has been filed, the judicial system works to create a fair settlement between the business debtor and its creditors.

Most business bankruptcies fall into one of four categories, or types of filing:

• Chapter 7: Bankruptcy Liquidation—This type of bankruptcy dissolves the company, selling off its assets to pay all or part of its debts. Chapter 7 bankruptcy protection is generally utilized by companies with irresolvable cash flow or financial problems and by small, sole proprietorship businesses.
• Chapter 11: Bankruptcy Reorganization—This type of bankruptcy takes the corporation through a period of structural and financial reorganization with the goal of regaining profitability. Operations are typically streamlined to reduce costs, some assets can be sold off to satisfy creditors, and other changes are all options with this type of corporate bankruptcy. Chapter 11 bankruptcy filings are generally used by large and medium-sized corporations.
• Chapter 12 Bankruptcy: Bankruptcy for Family Farmers and Fishers—this specialized form of business bankruptcy is designed for family farming and fishing operations, and is used with less frequency than Chapter 7 and Chapter 11 bankruptcy.
• Chapter 13: Wage-Earner Bankruptcy—Frequently used in personal bankruptcy filings, this type of bankruptcy can also be used by sol proprietorship companies. Enabling them to repay debts over a set time period (usually three to five years), Chapter 13 bankruptcy allows the business owner to retain their assets.

If you’re considering filing for corporate bankruptcy, give us a call before making any final decisions. We can provide you with expert advice regarding the future of your company.