Business Bankruptcy: Should I still pay ____ ?

The general rule of thumb here is that you should still pay expenses that are necessary to preserve your assets. For example, most businesses will want to keep paying their electric bill because electricity powers things like the refrigerators that keep food from going bad, the sprinkler system that keeps plants alive, or the burglar alarm that discourages theft.

When it comes to other debt, like a bank loan, there is no benefit to paying if bankruptcy is a certainty. Creditors will be paid what they can be paid after the Court liquidates the business assets. In addition, the Court is able to go back in time to reverse some transactions to make sure that all creditors are treated fairly.

When it comes to you, and the business paying you something that it owes you, the answer is “not until you check with your bankruptcy lawyer!” The Court’s power to go back in time and reverse transactions is especially powerful when the entity that benefitted from a transaction is an insider like the owner of the business. In addition, you could be opening yourself up to liability from a litigious creditor even in situations where a bankruptcy does not happen.

While preparing your case to be filed, your experienced bankruptcy attorney will be able to break down which debts or expenses should be paid, which should not be paid, and which would not have a significant impact.