Filing a Bankruptcy for a business effectively kills said business. Operation ceases to continue and you have to hand over all control to a third-party (Trustee). So why would someone want to do this? Why not just stop operating the business, and walk away?
- Avoid Litigation: If you business is being pursued by creditors, you will need to answer any requests and provide requested documentation. This can result in numerous court appearances, interrogatories, production of documents and depositions. And that is just for one case. If your business has multiple creditors pursuing you, then you may be tied up in court for months, if not years. However, if you were to file for Bankruptcy, the Automatic Stay will prevent the lawsuits from continuing against the company. At that point any complaints of non-payment by creditors will then go the Trustee, and not you.
- Unwilling Management: Sometimes those running your business may be reluctant, unwilling or unable to wind down a company’s affairs. There could be a fear that they will holdover, and continue running a business that will never fulfill the promises given to customers … and the last thing you ever want is for your company to commit fraud by taking money, when it has no intentions or ability to ever provide the service or product promised. When you file for Bankruptcy the Trustee takes control of the company, they are able to use their vast resources and remedies to properly cease operations, and ultimately protect you from the liability of unauthorized transactions and obligations.
- Diversionary Tactic: A creditor that may have a claim against you personally may see the filing of bankruptcy, and cease all collection attempts against you. This may be due to their debt being satisfied by the liquidation of the company, they get distracted by the business bankruptcy that they forget about the personal liability, or simply due to their misunderstanding of the law.
- Peace of Mind: Lastly, and perhaps most importantly, by filing for Bankruptcy you know that all proper steps are taken. You don’t need to worry if you filed the required paperwork with the governmental bodies. You don’t need to worry if you business is continuing to accrue liability by technically still being open. And most importantly, you don’t need to be constantly looking over your shoulder wondering what skeletons from the past will be coming for you next.
If you are considering filing a bankruptcy for your business, feel free to give us a call at 616-920-0555, or use the contact form below to schedule a time to come in for a free consultation.