Business Bankruptcy Alternatives — Bankruptcy Attorney — Lawyer R.J.Atkinson
If your business is having problems with debt, the debt problems can often cost the business more than the debt itself. Business reputation, employee morale, and credibility are some of the intangibles that can be affected by business debt problems. What can be considered small debt problems can easily snowball into bigger problems when collection actions begin. When a business is in financial trouble and a vendor or supplier isn’t being paid, the other vendors in the industry can get wind fairly quick. It’s not uncommon to see a business having debt problems with one or two vendors, and the next thing you know is that the business is on cash only with all vendors; key employees start defecting to competitors because they foresee their jobs being in jeopardy, then some customers stop doing business because of the fear that they won’t get their product or service timely. There is a myriad of potential situations and outcomes, but one thing is usually the same in most business that have debt problems; Debt.
If you have business debt that is becoming unmanageable or getting out of control, contact The Law Offices Of R.J.Atkinson. We can explain your options to deal with business debt and the problems that go along with it at a free initial consultation. Whether it be defending the lawsuit or filing for bankruptcy, we can help you to make an informed decision about your company’s debt problems.
Even when a businesses financial difficulty is caused by a third party, such as a slow paying customer or a bankrupt customer, it can have a huge impact on overall financial difficulty. When a business is strained to its limits by debt, Bankruptcy can be an option to address businesses debt problems. Depending on what type of business and a number of other factors, Filing for Business Bankruptcy can sometimes be the best option. Federal bankruptcy law helps businesses deal with their debt by allowing them to either request a complete liquidation under Chapter 7 of the Bankruptcy Code or a repayment plan under Chapter 11 Bankruptcy. To take advantage of a complete liquidation under Chapter 7, the business must close its doors. The business that opts for the repayment plan under Chapter 11 may remain open. An individual who operates a business as an unincorporated sole proprietor (other than stock and commodity brokers) can also use Chapter 13 of the Bankruptcy Code to repay debts but only by filing as an individual and including the business-related debts for which he or she is personally liable.
Now even though Business Bankruptcy can be the solution for many struggling businesses, it can also have a very negative impact on a business. When a business isn’t a good candidate for bankruptcy, or when bankruptcy doesn’t make financial sense, there are other business bankruptcy alternatives available. Surprisingly, there are many businesses that never obtain legal advice when facing problems related to business debt. They simply wait for a miracle hoping that their debt problems will go away on their own and the business will somehow miraculously be able to pay its bills. It is also surprising that many businesses and business owners ignore lawsuits, IRS tax notices, and even judgments in the hopes that a business money miracle will happen. If this sounds familiar to you, you should think again. Debt problems don’t go away by themselves. This is especially true when a lawsuit, IRS tax lien, or judgment lien is pending.
When a business is in debt and facing collection actions from creditors, it is usually best to not ignore their communications. Being proactive when debt problems ensue is most always better than ignoring them. When you deal directly with your creditors you may be able to obtain results you wouldn’t otherwise expect. When you have bigger debt problems that go beyond one or two creditors, it may require an overhaul or restructure of the business. If you have IRS liabilities like payroll taxes, lawsuits, and other issues which compound the business debt problems, you may need outside assistance to reorganize.
So What are the Alternatives to Business Bankruptcy?
Businesses confident that their financial troubles are only temporary may benefit from simply negotiating directly with their creditors. For example, when a business is facing a foreclosure on a commercial property or is behind on their lease, a mortgage holder or landlord may rewrite the mortgage or lease so that the past due amount is simply added into the total and amortized over the course of the loan or lease term. Other creditors may agree to stop their collection efforts and/or accept reduced payments if the business enters into a "forbearance agreement" promising to pay the debt in full over time. Some creditors may also allow a debtor to pay off the debt for a lump sum reduced amount. Whatever the situation may be, any alternative to filing Business Bankruptcy involves some form of negotiation. The following are a few of the Alternatives to Business Bankruptcy.
- Defending A Lawsuit
Businesses get sued for debts fairly regularly. The Texas Courts are filled with many debt related lawsuits. In some cases, it may be the best option for a business to answer a lawsuit. Especially if there are any defenses, a good chance to prevail, or if the business has a counterclaim against the plaintiff. Also, if the business can afford it, then it may be a good option to answer the lawsuit. If you believe you have a counterclaim or a good defense then you should seek the advice of an attorney. Although individuals and sole proprietors don’t need an attorney to respond to a lawsuit, businesses that are entities cannot represent themselves, so it is important to obtain legal counsel and properly answer the lawsuit and abide by the Texas Rules of Civil Procedure.
Keep in mind that if the business doesn’t answer in the statutory time to do so, then the law presupposes that the company in agreement with the allegations contained in the lawsuit. In other words, since it hasn’t opposed them, they must be true.
When a business fights back, it can be a different story because the creditor may not be expecting it. Even in cases where the money may be owed by the business, there may be an offset due, an incorrect amount claimed, or a procedural error which might get the case dismissed. Also, it isn’t always cost effective for the party suing to litigate at a jury trial over a period of years to collect a debt that could be discharged in a bankruptcy. They have to do a cost benefit analysis because even if they do decide to continue to fight, they know you can file for bankruptcy and potentially waste all their efforts.
- Forbearance Agreements
A forbearance agreement is an agreement by which a creditor will not to exercise their legal right to collect upon a debt owed by the business in exchange for an agreement to adhere to a repayment plan that will cure your delinquency. So in exchange for money paid in scheduled increments or the business taking some other action like assigning certain receivables to the creditor or agreeing to pay the debt by a certain date, the vendor or creditor agrees to temporarily stop collection efforts or legal actions against the business.
In essence a forbearance agreement is a repayment plan that will, over a certain time period, bring the business current on its account, debt owed, or payments due, and the creditor agrees not to take any further actions to collect. A forbearance agreement is not a always a good solution depending on how many creditors are involved. While most people and businesses don’t really want to go to court, there are some creditors who just won’t accept anything less than payment in full, so even when a forbearance agreement is proposed in good faith and in the alternative to bankruptcy, a creditor may not be willing to accept. Forbearance agreements are often used by those businesses that have temporary financial difficulties.
Administrative receivership is a procedure whereby a creditor can enforce their security against a businesses’ assets in an effort to obtain repayment of the secured debt. A receivership is a proceeding, originating in equity, under which a person (receiver) is appointed to take control of property and to preserve and administer it as the court directs. Although receivership is how judgment creditors and secured creditors have sometimes enforced their rights through the Courts, a voluntary receivership can provide a business many benefits similar to bankruptcy without filing for bankruptcy.
A receivership provides many of the benefits of a bankruptcy proceeding in that it forces all creditors into a single forum in order to address the debtor’s situation. Similar to the Automatic Stay of a bankruptcy proceeding, a receivership can sometimes stop the collection efforts of creditors, without the costs of time as in a bankruptcy proceeding.
A receiver can obtain a Court’s authority to liquidate assets, reorganize a business, or do what is best for the creditors and the business depending on the situation, without need for a hearing and a Court’s Order on every transaction. Receiverships can work well in situations where there aren’t too many creditors, lawsuits, or IRS tax liabilities pending.
If your Business Has Debt Problems or Ongoing Financial Difficulty Contact Us
If your business is having debt problems, there are other alternatives to business bankruptcy such as UCC Article 9 Sales, dissolution of a business entity, composition agreements, out of court workouts and settlement arrangements, assignments for the benefit of creditors, as well as simply letting the business be. Whatever debt problems the business may be experiencing, it is a good idea to get advice from an experienced bankruptcy attorney who can go through the bankruptcy and non-bankruptcy alternatives for your business.
Debt problems for businesses can be quite complicated, so if you or your business is facing financial difficulty and you are considering filing a bankruptcy, contact The Law Offices Of R.J.Atkinson,LLC today. With offices in Austin, San Antonio, Houston, Dallas, Waco, Plano, New Braunfels, we can help you decide if Business Bankruptcy is right for your company. Contact Us for a business bankruptcy evaluation.
Business Bankruptcy Alternatives | Alternatives to Business Bankruptcy | Bankruptcy Law
Contact Texas Bankruptcy Attorney R.J.Atkinson: 800-436-9056