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IL bankruptcy lawyerThey say that to start up a business, you should plan to have at least five years of savings to support your business without profiting by a single dime, and if you can make it past the five years, your business has a higher potential for long-term success. The truth is, any company can experience financial turmoil at any point, be it two days or two centuries into service. The industry for which your company operates may fluctuate, or an unforeseen public catastrophe may drive business away. At what point do you decide to file for bankruptcy?

Small Business Bankruptcy

In some cases, but not all, you may be eligible to continue your business operation after filing for bankruptcy. Bankruptcy is an option when a company has accumulated more debt than the profit it is bringing in, with no hope of catching up. There are two options for small businesses, which become a decision based on the future goals of the operation. If you would like to try to remain in business but need help with the accumulating debt, Chapter 11 bankruptcy may be an option where debts reorganize. If quietly closing the doors on this business and this part of your life is the best avenue, Chapter 7 will be the better option.

How to Decide If Bankruptcy Is Necessary

When you began your business, you determined what sort of financial structure you preferred. Did you want to be a sole-proprietorship? A limited-liability entity? A partnership? Believe it or not, this may play a role in your determination of if the bankruptcy process is right. If your business is a corporation, LLC, or other entity with limited liability do not have as much of a risk on their personal assets and may choose another option. Other factors to consider include:

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IL bankruptcy lawyerFinancial trouble can happen to any business of any size at any time. Unfortunately, knowing this does not make the process easier or less devastating. What can make it easier is knowing what to expect and where to find assistance. The following can help you with both aspects of small business bankruptcy and may even provide you with hope for an alternative solution.

Deciding Whether You Should File

When your business has overextended itself, fallen short of income projections, or otherwise taken a major financial hit and the debts begin piling up, bankruptcy might seem like the only option. Thankfully, this is not always the case. It may be possible to negotiate your debts or restructure your business spending so you save more money. Whatever your situation, you should commit to speaking with an attorney before moving forward. Your lawyer can examine your business earnings, debt, and projections to help you determine what options may be most suitable for the future of your company.

If Bankruptcy is the Best Choice

Although some business owners may find other options for saving their company, others may learn that bankruptcy truly is the most viable option. This does not necessarily mean you have failed—all kinds of businesses go bankrupt. It does mean that you are going to spend a lot of time speaking with your attorney about your options. Should you file for liquidation or Chapter 7? What are the pros and cons of each option? Is there any hope of saving your business, and if so, is it worth the risk or financial burden? These are all questions you should ask.

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waukegan bankruptcy lawyerWhen you file for protection under the United States Bankruptcy Code, you may be able to stop creditors and bill collectors from harassing you for payments that you cannot afford. Depending on the type of bankruptcy you are filing, you may also be able to get a substantial portion of your debt discharged.

Whether you file under Chapter 7, Chapter 11, or Chapter 13, bankruptcy proceedings can be complicated and time-consuming, and it may be tempting to take shortcuts. Doing so, however, is incredibly dangerous and could lead to even more serious problems than not being able to pay your bills. Bankruptcy fraud is not just a serious matter; it is also a federal crime punishable by imprisonment in a federal penitentiary.

Virginia Man Faces Prison Time for Bankruptcy Fraud

According to the United States Department of Justice (DOJ), a 67-year-old man from Abingdon, Virginia, will be sentenced in May after pleading guilty to one count of bankruptcy fraud in federal court. Last week, the man acknowledged that he misrepresented information in a Chapter 11 bankruptcy proceeding that he initiated in September of 2015.

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Libertyville Bankruptcy AttorneyOriginally published: November 29, 2015 -- Updated: August 10, 2021

UPDATE: In addition to understanding how the dismissal of a bankruptcy case may affect their ability to refile for bankruptcy and address their debts, a person will also need to understand how foreclosure proceedings will be affected. An initial bankruptcy filing will place an automatic stay on any collection actions, meaning that creditors will be required to cease all attempts to collect the debts owed or repossess property. This automatic stay applies to foreclosure proceedings, so by filing for bankruptcy, a person may be able to prevent the loss of their home. However, if a bankruptcy case is dismissed, a person is returned to the same position they were in before filing for bankruptcy, and creditors will be able to resume foreclosure proceedings.

A recent case in Pennsylvania illustrates how the dismissal of a bankruptcy case may affect foreclosure proceedings. In this case, a homeowner filed for Chapter 13 bankruptcy to prevent the foreclosure of their home. Because the debtor did not file all of the necessary documents, the bankruptcy court dismissed their case. The debtor filed a motion for reconsideration, and the court granted this motion and reinstated the bankruptcy case. However, between when the case was dismissed and when it was reinstated, the lender resumed foreclosure proceedings and sold the home. While the debtor argued that the automatic stay for the initial bankruptcy filing should have applied, the court ultimately ruled in the lender’s favor, finding that the lender was allowed to resume foreclosure proceedings following the dismissal of the case.

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Why Child Support Payments are Not Subject to the Automatic Stay

When you file for bankruptcy, the automatic stay goes into effect. This is a legal order that stops your creditors from continuing their efforts to collect the debt you owe them. It is your chance for a “breather,” a bit of relief from their collection attempts as you organize your bankruptcy case and begin the process of repaying and discharging your debt.

There are two notable exceptions to the automatic stay: child support and spousal support payments. When you file for bankruptcy, you must continue to make these payments.

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