Bankruptcy, or not being able to repay your debts and meet financial obligations, is the worst-case scenario for many small business owners. To survive it, you’ll need the help of a specialized bankruptcy attorney. These professionals know the ins and outs of bankruptcy in your area and state. They may be able to save your business. However, while an attorney can give you great advice, you need to know the right questions to ask them. Below are the five most important questions to ask a bankruptcy attorney in an initial consultation.
Are You An Attorney?
Many law firms save money by employing few attorneys. It makes a certain amount of sense. A lawyer is expensive. It’s a waste of money to have them do work that can be done by a para-legal or other professional. Not everyone working for a law firm needs to have passed the bar. However, many larger firms cut corners by entrusting initial consultations to salespeople. These non-licensed professionals are there to get you to sell. In this consultation, you do need legal analysis, which a non-lawyer can’t give. Therefore, make sure that straight away you are actually talking to an attorney who understands the consequences of life after bankruptcy.
Do I Need To Declare Bankruptcy?
You should ask if bankruptcy is a necessity. Many good bankruptcy attorneys actually save people from bankruptcy. The situation may seem very grim from your perspective, but it might not be quite that black. Especially if your business is still open and making money, it might be possible to come to an out-of-court settlement with your creditors. A bankruptcy attorney will be able to look at your case and see if a settlement is possible. They may even be able to negotiate it for you. A bankruptcy is costly, difficult, and irreversible. Every option should be considered before you file for it.
Can I File For Chapter 11?
Ask about filing chapter 11 bankruptcy. There are multiple types of bankruptcy you can file for. The two most common for business’ are chapter 7 and chapter 11. Chapter 7 wipes out specific business and personal debt. However, a state appointed trustee can seize your business and some personal assets and liquidate them to pay off your creditors. In chapter 11 you have to repay all debts, but you can keep the business open and are granted more time flexibility in repayment. This gives you a better chance of coming out if bankruptcy with your business intact. However, it is more expensive to file for chapter 11, and the state won’t let you if you can’t prove you’ll pay the money back. You should check with the lawyer to see which one is best for you.
Can I Avoid A Personal Bankruptcy?
It’s important to know where your personal finances stand in terms of a bankruptcy. The answer to this will change drastically depending on how your business was structured and type of debt. According to Bradford Law Offices, “Everyone’s debts will be different, and everyone’s financial situation will be, too. That means the solution to your difficulties also needs to be tailored to your specific circumstances.” If you formed a corporation or were part of a partnership, your personal finances might enjoy some protection in a bankruptcy. On the other hand, you could be at risk if there are any personal guarantees to the creditors on behalf of the business. Make sure your lawyer takes you through your personal responsibility and determine whether you’ll also have to declare person bankruptcy to satisfy the court.
What Services Are Not Included In Your Fee?
When meeting with attorney, find out their fee structure. Bankruptcies are complex legal proceedings, making them hard to bill. The fee that a lawyer will quote you will likely be what they charge for basic services for filing. Your actual bill may be affected by what specific jobs, like negotiating with creditors, the lawyers also must do. As a result, make sure you know what services you will likely need and what extra they will cost. By asking about costs, you can estimate an actual quote for all the lawyer’s services.
Bankruptcy is a tough road to fixing your long term capital management. If you find yourself needing legal advice one for your business, it’s likely you will be distraught. However, now more than ever you must make the right choices and seek the right advice. Remember that just because you’re desperate doesn’t mean you can’t ask tough questions and judge people for yourself. As well, keep in mind the situation is solvable, and many people do walk out of bankruptcy stronger than ever. Don’t be afraid to ask for help, because you only get to make this decision once.