No business wants to file for bankruptcy — but when debts are piling up and you just can’t seem to find a way out, it’s an option that’s guaranteed to stop creditors in their tracks and give you a chance to save your business, as well as your personal credit and assets.
Unsure whether or not it’s time you start the filing process? Our Texas attorneys are here to walk you through it.
5 Signs that You Should Strongly Consider Filing for Business Bankruptcy
When choosing whether or not to file for business bankruptcy, the first question you should ask yourself is if you’re willing to take further steps to keep your business going or not. If your heart just isn’t in it anymore, you can talk with a Texas lawyer about how best to dissolve your business to protect yourself from future liabilities.
If you're still dedicated to the business itself or even just the idea of your business, filing for bankruptcy could be the only way to guarantee to keep it — or at least keep the best parts of it. Below, we’ve listed five signs that you should strongly consider starting that process.
1. Taking Out a Loan Would Just Add to Unmanageable Debt
Avoid borrowing blindly with no end in sight. If your business already has a lot of debt piled up and you can’t identify enough future revenue to pay it off, taking out a loan could make matters worse and open yourself up to personal negligence claims.
2. Your Business or Customers Are Being Harassed By Hostile Creditors
Many businesses borrow to get operations up and running, which often means maxing out credit cards, applying for bank loans, and/or borrowing money from friends, family, or high-interest, high-risk lenders. But if your business is unable to pay each of those creditors in a timely manner, they’re going to start nagging you — and if they’re impacting your business (or worse, contacting your customers), immediate action is required. So, if you, your employees, or your customers are being harassed by creditors, it’s likely time to seek counsel about relief through business bankruptcy.
3. Your Business Is Having Trouble Making Payroll or Is Behind on Payroll Taxes
Your business needs to keep enough in the bank account to pay employees, but that can get difficult when it's swamped by other debts and monthly bills. If your business is unable to make payroll or is just barely squeaking by, it may be time to consider a different solution and file for business bankruptcy so you can avoid the personal liabilities due to payroll obligation of government required taxes.
4. You’ve Already Leveraged All Your Assets
In the process of paying off business debts, businesses often leverage assets as collateral for new loans. But, when your business has already leveraged all your assets and you have no more equity to pledge, you’ve run into trouble.
And if you’ve gone even further down the dangerous debt path of pledging future assets or receivables, you need to restructure your debt and get back to a highly profitable business model. This is an instance where getting wise counsel from an experienced law firm is critical.
5. You Have a Good Business, but Your Debts Make it Impossible for You to Collect a Healthy Paycheck
As a business owner, you should NOT have to work for free. It’s difficult to live happily ever after when you’re sacrificing your personal well-being in an attempt to pay everyone else.
Be honest with yourself. Does your business make money? Outside of the business's current debt payments, could it function profitably? If you could eliminate or restructure the payment terms of your debt, would your business bring in enough revenue to pay yourself what you deserve? If the answer is yes, filing for business bankruptcy can give you the chance to restructure your business. If the answer is no, it's important to be honest with yourself, and with your attorney. Sometimes, dissolving a business that won't become profitable is a better path for all parties.
How to File for Business Bankruptcy in Texas
If your business has made the difficult decision to file for bankruptcy, your next step is figuring out how and when. As lawyers working with business owners over many years, we know that the business bankruptcy filing process in Texas can be overwhelming and intimidating, so we’ve outlined some steps to help get you started below.
1. Consult With an Experienced Texas Business Bankruptcy Attorney
Your first step to file for bankruptcy in Texas should be to consult with an experienced business bankruptcy attorney. Ideally, you want a law firm with experience defending business owners and their business from hostile creditors in and out of bankruptcy. They should advise you on how they intend to protect you personally, as well as which type of business bankruptcy best fits your situation and serves your long-term interests.
As mentioned previously, a good business bankruptcy attorney should work to truly understand your business and provide counsel for how to help you become successful in the long term. They’ll do much more than just run through the motions and file your paperwork. Instead, they’ll give you the best recommendations for how to restructure your debt and ultimately become profitable again.
2. Protect You and Your Business While You Prepare the Necessary Documents
Unless your business is filing an emergency bankruptcy, the preparation stage often takes 3-6 weeks. With the help of your attorney, you’ll need to gather all the appropriate documents to file for bankruptcy. This includes things like income sources, financial statements, secured and unsecured debts, assets list, tax returns, and more. If you or your business is under attack, the attorney should defend or counter hostile creditors to buy time until the bankruptcy protection kick in upon filing.
3. Complete Paperwork
Just like any other legal process, filing for business bankruptcy in Texas and elsewhere comes with a lot of paperwork. Your attorney can help guide you and provide resources through each step of the process — ensuring a thorough and properly prepared bankruptcy petition, ready to turn into the court.
4. File for Business Bankruptcy
Your business bankruptcy case, along with the associated federal protections it provides, starts upon filing a bankruptcy petition with your local bankruptcy court and paying the required filing fees. Once filed, all creditors must stop bothering you and your customers.
Get Help Filing for Business Bankruptcy in Texas
If you’re worried that your business is moving close to bankruptcy, talk to a business bankruptcy attorney as soon as possible. Always choose an experienced attorney in your state, as they’ll understand the unique laws and regulations that apply to your business and area. Also, avoid attorneys who specialize in personal bankruptcy. Even if you suspect you might need to file personal bankruptcy, an experienced business bankruptcy attorney will be able to provide advice for both you and your business.
Looking for a bankruptcy attorney in Texas? Contact The Lane Law Firm. Our lawyers are well-versed in various types of bankruptcy and business restructuring approaches. We’re here to help you figure out a plan to move forward, restructure, and become profitable once again.