Ten Business Bankruptcy Tips

  1. No matter how big you are, unless you have inherited great wealth, you are probably not too big to fail.
  2. Develop a financial disaster plan.  If you have a year or two advance warning, consider putting your business assets into a separate business entity such as a corporation or an LLC.
  3. Don’t give an unlimited personal guarantee of corporate debt.  If the bank insists,  seek another bank. See if the bank will accept security in lieu of a personal guarantee. Sometimes the bank will settle for a “bad boy” guarantee, wherein you simply promise not to interfere with the bank’s attempts to collect its loan.
  4. Keep good books and records.  When times get tough, don’t lay off the bookkeeper.
  5. If you have to “feed” your company on Thursday, to make payroll, take back a secured interest in company assets later on that same Thursday  Perfect that security interest immediately.
  6. Don’t wait until you are too broke to fund a chapter 11 or chapter 12 proceeding before seeing a bankruptcy lawyer.  He or she will need a good retainer as you won’t be able to pay attorney fees after you file without a court order.
  7. Remember, if your business is earning enough to cover rent/mortgage/utilities/payroll and payroll taxes, no matter how much debt you have, you may be able to reorganize in Chapter 11 or 12.
  8. Don’t wait until the bank is ready to foreclose before seeing a bankruptcy lawyer.
  9. If your attorney recommends a bankruptcy lawyer, go back to that attorney after your bankruptcy case is concluded for your other legal needs.
  10. Report ALL your assets and ALL your liabilities on your bankruptcy schedules, no matter how disputed, no matter how contingent.