[Case Study] Bolt Diesel Saved by 90% Debt Reduction in Bankruptcy
E.J. Simonsen | Apr 11, 2022
Bolt Diesel faced substantial challenges in effectively managing their cash flow, which ultimately led to the accumulation of significant debt. Unable to maintain their operations under the weight of this heavy debt burden, Bolt sought the guidance and expertise of The Lane Law Firm to assist in restructuring their debt and ensure the continuity of their business activities.
|DEBT BEFORE BANKRUPTCY||DEBT AFTER BANKRUPTCY||TOTAL DEBT REDUCTION|
Chapter 11, Subchapter 5 bankruptcy is a fairly new option for struggling small businesses to wipe away debt and reorganize for profitability. Many business owners are hesitant to file for bankruptcy due to a lack of understanding, but this case study outlines how The Lane Law Firm helped a West Texas small business eliminate 90% of its debt using this bankruptcy option.
Bolt Diesel Services is a semi-truck and trailer service business owned by Michael Rayos in Pecos, Texas. As a specialized, skilled mechanic, Mr. Rayos built his business by rebuilding motors for large transport vehicles. Unfortunately, due to personal hardship, challenges specific to his industry, and additional hardships outside of Mr. Rayos's control — the COVID-19 pandemic in particular — Bolt Diesel began accruing a large amount of debt. When Mr. Rayos turned to The Lane Law Firm, Bolt Diesel had accrued $362,358 in total debt.
This case study will outline how that debt started, and how The Lane Law Firm was able to wipe away 90% of it with a multi-faceted approach to Bolt Diesel's situation.
Trying to Remain Profitable In the Face of a Payment-Last Industry & Unscrupulous Lenders Who Prey on Owner-Operators
To start, Bolt Diesel was faced with a payment challenge inherent to the industry itself. The challenge revolved around the industry's practice of requiring the small business owner to shoulder all the upfront. The semi-truck and trailer service industry functions on a service-first, payment-last model. This means that service companies are responsible for bearing the financial burden of parts costs, and labor until the job is complete, and the invoice can be paid. This contributes to cash flow concerns for any business, let alone one that has already been targeted by unscrupulous lenders.
Despite these challenges, Mr. Rayos was working hard to build Bolt Diesel. To combat the upfront costs, the business had taken out loans to make payroll and purchase parts. Unfortunately, like so many owner-operated businesses in Texas, Mr. Rayos was approached by shady business advisors and predatory lenders who convinced him to sign high-interest loans the business would never have time to pay back, rather than providing legitimate business advice.
Due to the poor advice of these predatory lenders, Bolt Diesel eventually did not have the cash flow to float their services before clients could pay. The business was actually forced to turn away work. There were several opportunities where, if not for the lack of cash flow, Bolt Diesel could have made lucrative partnerships with municipal transportation departments for service and repair. But, because of this crippling debt, the business was sinking.
In the midst of all these financial struggles, Mr. Rayos was hit with several significant family illnesses and losses, compounding the stress of his business's financial struggles.
Chapter 11, Subchapter 5 Bankruptcy Combined With a Strategic Business Financing Plan
When Mr. Rayos saw that these debts were keeping Bolt Diesel from taking on new business, coupled with the fact that he was constantly being harassed by multiple merchant cash advance creditors, he knew it was time to find a way out. That's when he reached out to The Lane Law Firm.
The team at The Lane Law Firm was able to immediately connect with him and work to understand his business's position, needs, and timelines. With a better understanding of the business, the Firm knew that for Bolt Diesel, a Chapter 11 Subchapter 5 bankruptcy would be the best option.
While every business requires a different debt relief solution, in the case of Bolt Diesel, Chapter 11 bankruptcy offered a more holistic solution that combined business restructuring, debt settlement, and more.
Choosing this type of bankruptcy gave the Firm a strong starting point to getting Bolt Diesel back on its feet. While the attorneys worked to put that solution in motion, they also recommended a short-term contract CFO: Bob Wells with B2B CFO. Mr. Wells was able to help Mr. Rayos get his financial reports in order for the filing and identify short-term project financing with reasonable terms.
By attacking Bolt Diesel's challenges from all angles — legal and debt restructuring support from The Lane Law Firm and Bob Wells — a comprehensive, multi-faceted solution was put into place that put Bolt Diesel back in business.
The Lane Law Firm Wiped Out 90% of Bolt Diesel's Debt, Enabling Mr. Rayos to Start Fresh.
Thanks to this multi-faceted approach, The Lane Law Firm was able to wipe out 90% of Bolt Diesel's debt. When Mr. Rayos came to the Firm, the business had $362,358 in total debt. After filing for Chapter 11, Subchapter 5 bankruptcy with The Lane Law Firm, Bolt Diesel ended the process with a responsibility to pay just $32,820 in claims.
The Lane Law Firm was able to wipe out $329,538 in debt for Bolt Diesel — 90% of the business's total debt!
And that's not all. In addition to eliminating 90% of the business's total debt, Bolt Diesel's work with short-term contract CFO Bob Wells ensured that Mr. Rayos was able to keep 100% equity in his business. He was also able to meet his reporting requirements to the bankruptcy trustee accurately, and on a timely basis, until the court’s decision was final. This is key to a successful conclusion.
As a result of this work, Bolt Diesel was able to obtain non-traditional financing. This funding made it possible for them to secure municipal contracts that were previously out of reach, and develop a business plan that will keep moving the company forward. Any remaining debt Bolt Diesel has is on a manageable repayment plan that will not impact the business's long-term success.
Chapter 11, Subchapter 5 Bankruptcy Helps Small Businesses in Texas Escape Predatory Lenders
In West Texas and across the state, small businesses pursued by predatory lenders have options. Like Bolt Diesel, you don't have to stand for the harassing calls of predatory lenders. Chapter 11, Subchapter 5 bankruptcy is a legal option that helps erase significant amounts of debt, and supports small businesses with a plan to repay any outstanding balance with a clear, reasonable repayment plan.
Bankruptcy can sound like giving up. But when you partner with an experienced law firm that understands your business and your goals, your business can see results similar to those we delivered for Bolt Diesel. If your small business is struggling, don't wait — help is available, and it doesn't have to mean closing your doors! Contact The Lane Law Firm.