Filing for bankruptcy as a business can be a costly process. It is not uncommon for a Chapter 11 bankruptcy petition to reach costs of $50,000 or more – the filing fee is almost $1,000 on its own. You can, however, reduce these costs if you avoid some of the biggest mistakes made by businesses, especially small business. Here are the top five mistakes made under a Chapter 11 petition.
1 – Not being realistic – A Chapter 11 petition is designed to allow a business to restructure and trade their way out of debt. Sometimes, no matter how much you restructure, some businesses are doomed. Planning a restructure can be costly so if creditors reject your plans, that cost has been a waste. Be realistic – if the business has little chance of success, then cut your losses and opt for a Chapter 7 petition instead.
2 – Include all your debts – The single biggest mistake made by small businesses is the failure to include all debts in their petition. The law makes it mandatory to include all debts no matter how big or small. Creditors will assess a restructuring plan based on the known debts and the ability to trade your way out of debt. If your new debts appear, creditors can challenge and have the petition dismissed leaving you without the protection of the bankruptcy court.
3 – Engaging a bankruptcy attorney – Filing a Chapter 11 bankruptcy petition without the aid of an attorney is taking a huge risk. Chapter 11 petitions are extremely complicated and generally beyond the abilities of anyone without legal training.
4 – Tell your attorney everything – Failing to reveal everything to an attorney is another mistake made by small businesses. If your attorney is aware of everything, they can put in place legal plans that offer you the greatest protection.
5 – Waiting too long - By far, the biggest mistake made by businesses is putting off the inevitable. If your business is in trouble, speak to an attorney earlier rather than later. Your attorney is best placed to help you organize your business in such a way that it may be salvageable. Wait too long and it may be too late to contemplate a restructuring plan.
If you value your business and want to keep it, then act quickly, with legal assistance, and be completely honest and upfront with yourself and your attorney.
Similar Posts:
- Dealing With A Small Business In Bankruptcy
- What Is An Emergency Bankruptcy?
- Can Anyone Be Forced Into An Involuntary Bankruptcy?
- Debts That Are Eliminated By Filing Chapter 7 Bankruptcy
- Chapter 11 Bankruptcy: Thousands of Creditors, One Committee
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