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Things to know before you file for bankruptcy

Before filing for bankruptcy, business owners should explore every available out-of-court option for dealing with the debt. Going to bankruptcy court can be costly, and it is important to get comprehensive legal advice before taking that step.

One of the first things you'll need to do is get an accurate valuation of your business. This will give you a picture of whether debt reorganization is likely to return your business to profitability. In one of our recent posts, we discussed a number of debt reorganization options.

If you choose to file for Chapter 11 bankruptcy, then you'll need to develop a bankruptcy plan to present to the court. You'll also need to negotiate with creditors to establish a workable repayment plan.

An important thing to understand is that the steps you take during bankruptcy will have to be approved by the court. If you plan to use cash from the sale of business assets in order to keep the business operating during bankruptcy, the court will have to be assured that the sale will not hurt your secured creditors. Understand, too, that the court is not likely to approve a plan that doesn't offer proof of financial backing while the plan is executed.

Shulman, Hodges & Bastian LLP started out as a bankruptcy boutique law firm. Our attorneys know bankruptcy inside and out. In addition to representing individuals and businesses facing insolvency, we represent creditors and creditor committees, including lending institutions such as private banks, national and community banks, and private equity firms. We also represent and advise bankruptcy trustees.

If you have questions about insolvency-related matters, then seek advice from an experienced bankruptcy lawyer.

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