The main reason most businesses file for a bankruptcy is because they either need more time to pay their debts or they desire to close up shop for a variety of reasons (unprofitable products, impossible-to-repay debt). Businesses hire bankruptcy attorneys to take charge of the bankruptcy process, which could fall either under Chapter 7 or Chapter 11. Chapter 7 denotes liquidation, while Chapter 11 denotes reorganization. When the entire business bankruptcy process is through, the business becomes free of debts. Here are a few facts that you should know about business bankruptcy:
1. There are debts that fall under priority debts. You cannot just avoid paying these debts or pay them in parts. The business owners are personally liable for debts like taxes, alimony, child support, student loans, court fines or penalties, criminal penalties imposed by the law, debts on account of injuries caused to others while driving under the influence of alcohol or drugs. The best business bankruptcy lawyers cannot help you with such priority debts.
2. The small business can only seek protection from debts that arose before the business filed its bankruptcy petition. Those debts that were obtained after the date of the filing of the bankruptcy petition could not be covered by the bankruptcy protection laws.
3. Clients are advised by business bankruptcy attorneys to list every debt incurred according to their schedule. If a debt is not listed, it cannot be discharged by the bankruptcy process.
4. If it is discovered that the business owner received any asset, including money, by fraud, then the debt will not be discharged by the court.
5. The court can deny the debt discharge in the event that it discovers an act of dishonesty by the business owner. Example of dishonesty could be lying, falsifying records, destroying property or records, destroying assets, disobeying court orders, etc.
6. Business bankruptcy lawyers can only help obtain a Chapter 7 discharge once in 8 years.
7. When the court discharges debts that are secured by an asset, like lien on an office building, it does not necessarily mean that the debt has to be paid in cash. The financial institution that holds the lien can take possession of the property and then sell it.
8. There are instances when the debtor may like to continue paying a debt even after the court has already discharged it. For example, if a business owner has obtained a loan for the purchase of a car and this loan has been discharged by the court, then the business owner can enter into a “Reaffirmation Agreement” with the lender and continue paying his debt (mainly because he needs the asset. The court supervises this type of agreement.
These are a number of details you have to be aware of before contacting or choosing from the finest business bankruptcy attorneys.
