Bankruptcy can affect you for a long time, so it’s prudent to consider other options before jumping in with a petition for bankruptcy. Many business owners who come to a point where they have to acknowledge that their business is failing panic and this leaves them missing additional options, or helpful actions they could take. In some situations when dealing with a failing business, there are no other viable options. In others, there are other options, but bankruptcy is the best idea. Should you file for bankruptcy? Should you not file for bankruptcy? No one can answer that question definitively, but you. But I can walk you through the process of making the best determination of whether bankruptcy is a good fit for you or not.
First, find out the market value of any inventory or equipment and attempt to find an actual buyer so you can have the money in hand. Keep in mind that used equipment often brings much less in value than it is actually “worth,” especially when it is from a failed business or distress sale.
The debt remaining either belongs to the LLC or to you personally. Find out if you hold any personal liability. If the creditors gave the loans to your LLC then you are not responsible for them personally. When this is the case, the creditors can only go after the business, which is no longer operating.
If your business was an LLC, the creditor will only have the business tax identification number on file. You can determine this by calling each lender in question and entering your social security number. A personally guaranteed loan will be filed under your social security number and will be easy to find and identify as a personal liability.
You might consider settling with your creditors when you have determined if you have personally guaranteed the loan. Let’s say that you receive $10,000 from the sale of your equipment – you could then offer the creditors 50% of the outstanding balance to settle your account. Settling with the creditors will hurt your personal credit, but not nearly as much as filing for bankruptcy.
Should the creditors refuse to settle for less than the outstanding balances, you can opt to pay the balances down gradually with monthly payments. Do not give the creditors any money in lump sums. Instead make monthly payments. In the meantime, perhaps you will be able to acquire other employment, which will facilitate the payment of the entire debt.
The most important thing to remember is that financial trouble can happen to anyone. Don’t panic. You DO have options. The only thing left to decide is which option you are going to focus on. Get in touch to talk to an experienced southern California bankruptcy attorney at Westgate Law if you have additional questions about filing for bankruptcy.