Birmingham Business Bankruptcy Attorney

In today’s economy, most small businesses have suffered a decrease in business and cash flow. For many, even after tightening the belt and in some cases, decreasing or eliminating the owner’s draw or paycheck, there still is not enough money to go around and still exist.

As a bankruptcy attorney I can tell you that there are only several options available to deal with these problems. Some are bankruptcy related and some are not with the possibility of a bankruptcy later if creditors cannot be made to see the light. Creditors themselves are experiencing the same cash flow problems and reacting in different, unpredictable and sometimes nonsensical manners. Banks especially have many forces directing them such as the FDIC, profit motives, their share-holders and in some cases, their survival too.

Most incorporated small business have owners who have personally guaranteed the lion’s share of the business debt. They are not personally protected against a business failure.

There are non-bankruptcy methods of dealing with these issues. This is a non-exhaustive discussion and will depend on a particular industry, timing and the individual parties.

Even without obtaining voluntary concessions from creditors prioritizing who gets paid first and in full can help the business survive longer until hopefully the money comes back.

Today’s troubled business persons have difficulty with this as they are not used to not paying their bills. Most have run businesses which at different times have been very successful. They are just trying to hang on or muddle through until things get better.

Other options include a more voluntary approach to restructuring the business debts some creditors can take a reasonable view to these problems and try to work something out to allow both to survive. Not all are reasonable and some will react in ways that are just spiteful.

Allowing the business to close and dealing with the remaining creditors who have a personal guaranty can work depending on the availability of other funding or the lack thereof.

There are several bankruptcy options available in incorporated businesses. They are a Chapter 7 and a Chapter 11.

A corporation does not get a discharge in a Chapter 7 case. This means that the business entity itself will still be liable just like the case was not filed. In a Chapter 7 case, a Trustee is appointed to look for and liquidate (sell) assets (real and personal property) to pay creditors. Most of the time there are no assets over bank blanket liens and there is no real purpose in filing a corporation in a Chapter 7 case. There are exceptions. If there were unencumbered assets (assets with no liens or mortgages) to be liquidated, the Internal Revenue Service would receive a priority payment position and tax obligations which could later be personal obligations of the owners can get paid at least in part. It is possible, but not likely, that Chapter 7 liquidation could pay all the creditors and thereby exterminate the personal obligations.

A Chapter 11 case mainly would allow a business to formulate a plan to repay its debt. There are many conditions and requirements. A Chapter 11 can help a business, but it will not turn a bad business into a good one.

A Chapter 11 is expensive and time consuming for both the lawyer and the owners. The financial reporting requirements alone cause many cases to be dismissed. The oversight is very restrictive.

A Disclosure Statement is required to be prepared which will contain historical data and the reasons for filing as well as current and future projections. The rules related to this would cover the General Motors bankruptcy as well as a Mom and Pop store in Birmingham, Alabama. For a small business, the details required can be at the very least mind numbing.

At the initial consultation related to these problems, we would examine assets, liens, cash flow, as well as future viability of the business and hopefully form a plan with which to move forward.

The idea is to give you your options and probable consequences thereof in different scenarios so you can make a choice about what you need to do. It is your choice.

We can assist you with your bankruptcy or non bankruptcy options.