Frequently Asked Questions About Bankruptcy

Every year, more than 20,000 businesses around the country declare bankruptcy. Unfortunately, we may soon find that the COVID-19 pandemic has only increased these numbers.

The decision on whether or not to take this step is a challenging decision for most business owners. There is a lot about the process that you will need to get educated on and it will require patience. If the process is something you are considering, here are three questions that are frequently asked in the early stages of the process. 

Do you need a lawyer? 

Bankruptcies can be extremely complicated. Although it is not required by the bankruptcy code, most businesses are better served when they hire an experienced bankruptcy attorney to navigate the process with. These attorneys, such as Tully Rinckey, will help negotiate with creditors, help you collect and organize all of your paperwork and ensure that you and your business are positioned the best way possible. 

Which type of bankruptcy should I file? 

The type of bankruptcy your company ultimately files will depend on the answers to some important questions that the team at Tully Rinckey law will walk you through. For example, do you want to close your business or do you think you can operate on a profitable basis moving forward? Do you have a realistic plan for returning the organization to profitability? Is existing management capable of returning your company to profitability if you keep the business running?

What is the downside of declaring bankruptcy?

It’s important to understand that declaring bankruptcy cannot forgive all your debts. You can’t discharge student debt, back taxes, alimony, and other types of debt. 

Declaring bankruptcy will decrease your ability to borrow more credit. In addition, The bankruptcy will also appear on your credit report for between seven and ten years. This can make it challenging to get a new home or auto loan.

Finally, not all of your property will be exempt under Chapter 7. You may lose business assets that are seized to repay debts.