During the pandemic response, Lakelaw remains fully operational with our lawyers and staff working both at the office and from home. We are consulting with our clients daily, negotiating and executing transactions, and counseling businesses who are formulating a plan for survival in the future. We are also participating in virtual court proceedings to the extent the same are conducted.
You can call on Lakelaw to file a small business bankruptcy. Your small business can be a sole proprietorship, partnership, limited liability company, subchapter S corporation or even a subchapter C corporation.
If you are a sole proprietorship, you’ll need to file a personal bankruptcy to address not only your personal debts but also your business debts. The good news is that if your debts are mostly business debts, the means test won’t apply to you. You’ll be able to file a chapter 7 case even if you have a good income.
If you are a general partner in a partnership, you are personally liable for all of your partnership’s debts. We can file a bankruptcy case for your partnership. This will deal with claims against the partnership directly and result in the liquidation of the partnership’s property, if any, to pay for the claims against the partnership. But you as a general partner are still liable for partnership debts if the partnership can’t pay them. So you may wish to ask Lakelaw to represent you in a personal bankruptcy to deal with claims against you individually. Of course, there may be options other than bankruptcy to resolve your personal liability.
Limited liability companies and corporations are different. By definition, the liability of these types of entities is limited to their assets. So strictly speaking, it’s not always necessary to file a bankruptcy to wind up limited liability companies or corporations. However, creditors are not always clever enough to understand that suing a company with no assets gets them nowhere. Some creditors like to see the finality of an “official” bankruptcy filing. In these cases, we can file a bankruptcy for the limited liability company or the corporation.
Many times, you are personally liable for corporate or limited liability debt, especially if you guaranteed debt to a bank. And even if you didn’t guarantee a debt, like a trade debt to a vendor, you might end up getting sued by a trade creditor personally anyhow. So when we file a bankruptcy for your corporation or limited liability company, we might consider the possibility of filing bankruptcy for you too. We’ll include all the corporate, limited liability company or business debts on your petition whether you’re liable for them or not so that there is no question of any future liability for them.
If we file a bankruptcy for you and your business, you get a “package deal” – the attorneys’ fees for filing the two bankruptcy cases together is significantly less than the cost of filing two separate bankruptcy cases.
FREQUENTLY ASKED QUESTIONS – SMALL BUSINESS BANKRUPTCY
Do I have to file a bankruptcy for my small business?
Not necessarily. Bankruptcy is not the only option for small businesses in difficulty. The first question is whether the business can carry on. If the business can’t be profitable, then you have to close it down. You can close down a business many ways:
Chapter 7 bankruptcy
Informally closing the business
Assignment for the benefit of creditors
Sale to the bank or third party under the Uniform Commercial Code
Chapter 11 bankruptcy liquidating plan.
If the business can be saved by resolution of existing debts and making changes to carry on the business profitably in the future, you have other options.
What are the benefits of filing bankruptcy for my business?
It is fast and relatively inexpensive. A trustee is appointed and can liquidate anything which needs to be liquidated. Once you file your case, you can more or less walk away from your business except to the extent that you have personal liabilities. Lawsuits against the company will probably end since creditors understand the finality of bankruptcy
What are the downsides of filing bankruptcy for my business?
The trustee will look into transfers you might have made. You could get sued for insider preferences of fraudulent transfers. A trustee won’t maximize the value of your business on liquidation. The trustee will have fees and commissions. This will result in a higher deficiency claim against you.
How do I decide what to do?
Meet with the experienced and capable small business bankruptcy lawyers at Lakelaw. With our unparalleled experience and good business judgment, we can help you make the decision that is right for you.
Mr. H ran an MRI laboratory. This business wasn’t working out. Mr. H guaranteed the MRI lab’s debt to the Bank. The MRI had judgments against it. At first, we considered allowing the business to dissolve. Most of the MRI lab’s creditors understood that the business had no assets, that the Bank had a lien on everything and that there was nothing for them. However, one creditor still thought he should pursue the MRI lab. So we filed a bankruptcy case. The trustee found that the MRI lab had no assets. The remaining creditor still went after Mr. H. But Lakelaw continued to defend Mr. H at no additional charge. The creditor recovered nothing from the MRI lab and nothing from Mr. H. All assets of the MRI lab went to reduce the Bank debt and Mr. H’s personal liability to the Bank on his guaranty.