3 Tips to Avoid Small Business Bankruptcy
The last thing you imagined doing when you started your business is going bankrupt. Obviously, you were aiming much higher, and you're a survivor, and you would like to avoid making this particular dreaded declaration.
So what can you do? Let's take a look at what exactly bankruptcy is and three steps you can take to avoid it.
What Is Bankruptcy?
There are multiple types of bankruptcies, and you may be familiar with the terms associated with the most common of them, Chapter 7 and Chapter 13. But generally speaking bankruptcy is a federal court procedure that helps consumers and businesses to either liquidate or reorganize, clear debts, and pay off creditors.
3 Bankruptcy Tips
- Settle and negotiate debts: If you want to avoid such a proceeding, which does mean subjecting yourself or your business to intense scrutiny, consider debt settlement and consolidation. Negotiating with creditors for payment terms that work better for you may be preferable than bankruptcy for everyone -- creditors get repaid directly even if at a slower rate than desired rate, and you maintain your assets and holdings.
- Cut the fat: You are down to the last days of your business if you can't turn things around. This is the time to rethink every purchase you and your business make. That means all bread, no cake. You may be surprised to find the ways that you are still needlessly leaking money. If you don't scrutinize before you file for bankruptcy, rest assured that the courts will, so you may as well review all of your financials and figure out how to seriously tighten the belt. You may be surprised to find that you can steer the ship away from bankruptcy.
- Sell property or assets: Before you go bankrupt, consider what your business has and what can be sold and whether you can stave off disaster and head to a better place by liquidating a portion of your property or another asset.
Word to the Wise
Some experts suggest asking family and friends for help to avoid bankruptcy. Think about this very carefully, as it is not necessarily great practice to mix business and pleasure, much less business and relatives. Some families do business together of course, but if you can find an alternate source or can try some extreme cost-saving measures first, it's worth it.
Talk to a Lawyer
If your business is struggling financially and you are wondering about bankruptcy but wary about spending money to get guidance, do not. Consult with an attorney and get advice that is specific to your business and situation. Many bankruptcy attorneys consult for free or a minimal fee and will be happy to assess your case.
Follow FindLaw for Consumers on Google+.
- Find Bankruptcy Lawyers Near You (FindLaw's Lawyer Directory)
- Documents to Show Your Bankruptcy Attorney (FindLaw's Learn About the Law)
- Bankruptcy Glossary (FindLaw's Learn About the Law)
- 50 Cent Filed for Chapter 11 Bankruptcy: Does This Mean He's Broke? (FindLaw's Celebrity Justice)
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