Corporate Bankruptcy Attorney
When a company needs a corporate bankruptcy attorney, the owners should become familiar with the types of firms that represent companies through financial difficulties to determine which firm would best represent the needs of the company. Because bankruptcies are some of the most complex areas of law in the United States, companies need to bring in experts who can help the firm find its way through those laws. In fact, when filing, the lawyer will need to deal with contract law, tax law, corporate law, and real estate law. If the failing company owns real estate or has other assets, the importance of hiring business bankruptcy attorneys is even greater to preserve these assets. Once the firm files for protection under these laws, the court will administer immediate legal protection from creditors; however, the paperwork for the filing must be done correctly or the court may refuse to hear the petition, leaving the company open to further action from the creditors.
During most bankruptcies, the company will devise a plan to handle its debt and yet still continue doing business to be able to make profits and thereby be able to adhere to the payment plan agreed to in the court's proclamations. This means that the company must have a plan that recognizes its obligation to repay the debt owed and at the same time give enough breathing room to conduct business. The most common type of petition to file is called a Chapter 11. The other types of bankruptcies are for people other than businesses. For example, Chapters 7 and 13 refer to individuals and chapter 12 refers to farmers. A decline in sales can lead a business to amassing debt it cannot repay, so a corporate bankruptcy attorney will not only examine and advise the business on how to approach the court, but also will urge the business leaders to change business practices so that the downward trend will take an upward turn. That means that the company may also need to hire experts like corporate accountants to show it where the business practices need to change to optimum sales advantage. Sometimes, the downturn is due to a sudden loss of revenue that makes it difficult to pay suppliers and other creditors. This could come from contracts with other firms that are not longer renewed, some wrongdoing on the part of an employee that results in a lawsuit or government fines, or even a drop in stock prices. At this time, creditors may force the company into filing, especially if the creditors find that the owners are selling off assets to pay debts. Business bankruptcy attorneys can help owners file in emergency situations where these creditors are harassing them.
A corporate bankruptcy attorney can advise the organization it represents on how the laws are written in the state in which the organization is located. This is an essential part of the representation; therefore, business bankruptcy attorneys should practice in the state in which the petition will be filed. An important distinction in developing a plan with the courts is to understand the difference between secured and unsecured debt. Secured debt is that which is connected to assets such a property. Unsecured debt is debt such as credit cards which are not backed up by assets. Unsecured debts can be discharged, or eliminated by the courts. That is not possible with secured debt. A debtor has two options: either he can make the payments and make up the back payments or let the asset by repossessed. Creditors can have legal rights to the secured debt, making claims on the organization's assets. But complications can arise if the assets have claims on them such as loans or liens against property. Creditors may take out liens against intangible assets such as patents, trademarks, or intellectual property. Even if property has a lien, a creditor can still repossess it under certain terms. The court will also pay secured debt first in a settlement.
The corporate bankruptcy attorney will arrange for a debt adjustment, or a plan to repay the debts that the organization can handle with the current financial situation. Some of the debt may be discharged, leaving the company with less of a credit burden than before. A discharged debt is one that can be erased through the action of the court. A non-discharagable debt must be repaid, even though the terms may change. During a Chapter 11 petition, the business can continue to function normally, while maintaining control of its assets as bankruptcy attorneys help the owners reorganize the debts. In 2005, the repayment time allotted changed. Before 2005, businesses had an almost unlimited amount of time to reorganize. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 changed that by imposing a 120-day limit for a firm to come up with a viable plan that the court can accept. If the debtor has not submitted a good plan in that amount of time, the creditors can file their own plans, forcing the firm to repay according to their plans. That, of course, may put the firm in even further distress. This new law also requires that the filer must have lived in the state of filing for two years. Each state also requires different time limits for reorganization plans, qualifications for exempt assets, and limits on income subject to liquidation. In the past, many companies shopped around for a state with the best regulations concerning court's decisions, but because of the new two-year rule, businesses can no longer do this.
Hiring a corporate bankruptcy attorney is a serious decision which should be taken after careful advisement. The Bible tells us to seek good counsel, "Every purpose is established by counsel: and with good advice make war" (Proverbs 20:18). Check out the business bankruptcy attorneys in your area and choose one who is honest and diligent in representing the claims of his client.
Corporate Bankruptcy LiquidationOptions are available to a business facing corporate bankruptcy liquidation, and managers must carefully weigh various paths to determine the best solution for a corporation. It is important to any business to have a good credit history in order to cultivate a relationship with necessary vendors. Good credit is also needed to ensure that sufficient capital will be obtainable to continue essential cash flow. Also, one must be able to react quickly if an opportunity to expand or solidify a customer base presents itself. However, a downturn in sales, excessive inventory or unforeseen events may leave a corporation struggling to make ends meet. Ups and downs are to be expected in any business, but a prolonged plunge in profits can signal disaster. At times like these, difficult decisions must be made, and an investigation into the various forms of filing bankruptcy may be required.
Under Chapter 11 bankruptcy law, the focus is on rebuilding the company in order to maximize the potential for its continued survival. A committee, or several committees, is directed to the goal of helping the business to function profitably, in order to pay off the debts it has incurred and to proceed in a positive direction. The company continues to exist, and the present management still controls everyday decisions. However, the court must approve any major decisions. In contrast, bankruptcy filed under Chapter 7 proceedings are for organizations which do not entertain any prospect for survival. This type of bankruptcy filing essentially initiates corporate bankruptcy liquidation. In this case, the business is brought to an end and its assets paid out to creditors.
In both Chapter 7 and Chapter 11 bankruptcy filings, provision is made for redistributing assets to repay creditors. Business liquidation services may be required. Secured creditors are paid first, followed by unsecured creditors and, finally, stockholders. Interestingly, even securities from a corporation undergoing insolvency proceedings can be traded on a limited basis. Of course, these securities can carry a much higher risk of losing one's investment. Further information can be obtained from the Securities and Exchange Commission (SEC). The SEC maintains a database named EDGAR which keeps track of filings from corporations.
Even if a decision is made to enter bankruptcy proceedings, the work is just beginning. Sometimes debt counseling is a precondition to filing bankruptcy. After that, the plan to resuscitate the organization must be presented to creditors and other parties involved in the corporation. In addition, valuable time and resources are being invested in these proceedings. It seems as though this time and money could be better spent in actually building the business. There are no easy answers in the choice of a course of action to pursue in the consideration of business liquidation services. In the midst of these considerations is the fact that integrity is an important factor in any successful business. A Christian businessman will be especially careful to see that his decisions will be morally sound. The Word of God directs, Turn not to the right hand nor to the left: remove thy foot from evil. (Proverbs 4:27) Thus, a business owner should be careful to ensure that a financial solution is chosen which will best honor the agreements which have been contracted.
How can one know which course of action to take? Are there any further options available to an organization which is struggling to repay its creditors and avoid corporate bankruptcy liquidation? Happily, there is an alternative to filing for bankruptcy or engaging business liquidation services in order to pay off one's creditors. There are debt counseling services designed especially for business which can help in various ways. If a businessman wishes to avoid corporate bankruptcy liquidation, he can enlist the aid of these counseling services. These allow for several alternatives.
First, these debt counseling services often offer a free evaluation of the corporation without any financial obligation. This in itself can be a valuable decision-making tool for those considering a corporate bankruptcy liquidation. At the very least, such a report can give an objective picture of the present condition of the organization. Optimally, a course of action wiil be suggested which can reverse the downward spiral of a corporation and assist it in generating a positive cash flow. If an agreement is entered into with this service, it may assume a variety of responsibilities. Usually, a certain course of action will be suggested within the business plan. Help with advertising and other aspects may contribute to the success of the plan. At times, the counseling service will assist in presenting the store of goods in an attractive manner to encourage sales, or organize special events to sell off excess inventory.
Although in the latter action the counseling service may seem to be acting in same role as business liquidation services would under insolvency proceedings, there is one important difference. Contacting a counseling service will not adversely affect the business' credit report. In fact, if the plan suggested by the counseling service proves to be successful and reverses the financial situation so that there is positive cash flow, the credit report may actually be enhanced. With adequate cash flow, positive relationships with vendors and the resulting chance at further capitalization, a business may be able to avoid filing for bankruptcy altogether. Because the stakes are high, legal counsel should be consulted before entering into a bankruptcy proceeding. In many places, such advice may be available for free or at reduced cost from organizations which seek to encourage opportunities for commerce in the local community.