When should I consider filing my small business into Bankruptcy?
The answer to this question is actually simple. You should consider small business bankruptcy when you are insolvent or not profitable. Not understanding this answer is actually one of the most common reasons why many small businesses grow, succeed and then fail.
Hope and inspiration are the drivers of most new businesses. A new idea, a dream fulfilled, a tradition expanded upon, these are the sorts of mindsets that create small businesses that grow and thrive. But, they are not the mindsets that realistically assess whether customer credit policies are too loose, margins are too tight, demand has dwindled, or the cost of bank loans for liquidity is too high. That’s because small business founders are forward looking people who tend to believe that tomorrow’s success will easily eclipse today’s risk taking.
When we ask our prospective clients why they are in trouble, 90% of them include the phrase, “we had a cash flow problem” in their answer. In reality, cash flow problems are a symptom, not a cause, of trouble. The good news is that the Bankruptcy Code is specifically built to allow a company to remake itself, to diagnose problems, and to repair them. Chapter 11 is purpose built to allow a company to re-enter the economy and to prevent waste of valuable assets and relationships.
If you are tight on bills, asking vendors for extended terms, only disbursing net payrolls, or borrowing from internet lenders at double digit interest rates to stay afloat, you probably need help. If you are thinking about doing any of those things, you need to consult an experienced Bankruptcy specialist before you round a corner that is difficult to turn back from.
This article is written by an attorney at Attorney Donald Wyatt PC. Always consult an attorney before making any legal decisions. To make an appointment today, please click here to contact us.