The most common difference between a potentially successful reorganization and an unfortunately swift liquidation in small companies boils down to one word: PRIDE. People desperately scramble to borrow money at outrageous interest rates, they sell product at a loss, they turn a blind eye to paying over withheld taxes. They make all sorts of bad choices, some illegal choices, just to avoid having to go “Bankrupt.”
Of course, intentionally failing to pay over 941 taxes, and sales taxes, are crimes. So to is lying on loan applications to borrow money that should not be lent. These are actual crimes. Filing for Reorganization, or even Liquidation, is not a crime at all.
For the company that is insolvent, or on the brink of insolvency, the choices seem to be all bad. There is something naturally reprehensible about owing money that you cannot pay. So it seems that all choices are bad choices in some way. But, people inexperienced at insolvency are the first to say, to themselves, if not others, “at least we haven’t gone Bankrupt.” This is a product of pride.
Bankruptcy exists so that companies can re-enter the stream of commerce, assets can be kept in productive use and not wasted, people can keep good jobs, and our economy can flourish. Let’s face it, if every business ever created remained successful we would all still be using buggy whips. That might have made some buggy whip company Presidents happy but it certainly would not be the best outcome for us all. Bankruptcy is not the worst of all choices, it is the right thing to do when needed.
This article is written by an attorney at Wyatt & Mirabella, PC. Always consult an attorney before making any legal decisions. To make an appointment today for a free consultation, please click here to contact us.