Filing for bankruptcy is the last thing a business ever wants to consider. It’s not just stressful but has a financial impact that is felt for years.
Just because this is a last resort option doesn’t mean that it’s something you can just jump into without planning and considering all your options. Filing for bankruptcy as a business is a lot different from an individual filing for bankruptcy, and it’s not something that can be done on your own.
Your business is already in a vulnerable position, so get things right now by researching all your options. We have put together a list of five common mistakes businesses make when hiring a bankruptcy lawyer to help guide you in this process.
1. Choosing an out-of-state lawyer
You might be drawn to a big-name lawyer or firm that advertises years of experience and success. This is fine as long if the out-of-state lawyer or firm has an outstanding local representative in your state. If they don’t, you are going to want to find a local representation. Hire a Denver bankruptcy lawyer if you operate in Denver, for example.
There are federal bankruptcy laws that every court has to follow, but individual district courts often have their own set of procedures and rules. You are going to want someone who has experience within your state. It is even better if they have experience in the district where you are filing.
Before you hire a lawyer, make sure you know as much as possible about the lawyer you decide to go with. Don’t just go with the first name you find or someone who simply comes highly recommended.
2. Filing the wrong type of bankruptcy
Filing for bankruptcy is a business transaction, and like any transaction, you are going to want to know all your options and what is best for you. This is something that your lawyer will help you with, but do your research yourself.
Several factors go into what kind of bankruptcy you can file and what may be best for you. The amount of debt you have, whether you are a sole proprietor or an LLC, whether you wish to continue your business after the bankruptcy, and many other factors all play into the type you file. Filing the wrong kind of bankruptcy can end something you have spent years building. You don’t want that to happen.
Let your lawyer help you and make sure you ask questions along the way. It is better to play an active part in your bankruptcy than just sit back and let them take the wheels.
3. Not trusting your representation
Everybody seems to have a negative opinion of lawyers until they need one. Whatever the reason for this is, don’t allow yourself to feel the same way. Lawyers want to help you, but they can only help you as much as you allow us to help. If you have had previous negative experiences with lawyers, be upfront and honest about that. It allows your legal representative to address these feelings and fears from the very beginning.
You need to trust them so they can help you to the best of their ability. If you lie or try to hide things in the end, it will only hurt you and can easily turn into further legal problems.
If you cannot feel fully secure in the work they are doing on your behalf, it’s ok to let them know. Often it can be easily addressed and corrected with a few simple changes in the way things are being handled.
4. Overpaying for poor services
Most bankruptcy lawyers have a flat fee for filing and the other services that go along with it. Make sure you know upfront what the fee you pay is going to cover and be honest about what you can and can’t afford.
When you find yourself on the verge of bankruptcy, we know you don’t have a ton of extra cash on hand to pay for high legal fees and you can usually find great representation within your means. A good lawyer will not take advantage of you.
5. Not hiring a lawyer at all
This should seem like an easy decision but many people feel they can go at this process alone. Larger businesses and corporations usually have a legal department that will either handle or recommend another law firm, but often small businesses feel a lawyer is unnecessary.
If you are a small business considering bankruptcy, please don’t do it alone. It is a mistake you will quickly regret.
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