Filing for Chapter 7 business bankruptcy can be a complex and overwhelming process, but it can also provide a fresh start for struggling businesses. However, there are some common mistakes that business owners can make when filing for Chapter 7 bankruptcy. In this article, we’ll explore some of these mistakes and provide tips on how to avoid them.
Failing to Plan Ahead
One of the most common mistakes business owners make when filing for Chapter 7 bankruptcy is not planning ahead. It’s important to take the time to thoroughly review your financial situation and determine if bankruptcy is the best option for your business. You should also consider the long-term impact of bankruptcy on your business and take steps to minimize any potential negative consequences.
Not Hiring an Experienced Bankruptcy Attorney
Another common mistake is trying to file for bankruptcy without the help of an experienced bankruptcy attorney. Bankruptcy laws are complex and constantly changing, and an experienced attorney can provide valuable guidance and ensure that your bankruptcy case is filed correctly.
Failing to Disclose All Assets and Liabilities
When filing for Chapter 7 bankruptcy, it’s crucial to disclose all assets and liabilities. Failing to do so can result in serious consequences, including the dismissal of your bankruptcy case or even criminal charges.
Making Preferential Payments
Business owners may be tempted to make preferential payments to certain creditors before filing for bankruptcy. However, this can be considered fraud and can lead to serious consequences. It’s important to consult with an attorney before making any payments to creditors.
Not Following the Bankruptcy Court’s Rules
When filing for Chapter 7 bankruptcy, it’s important to follow the rules set forth by the bankruptcy court. Failing to do so can result in the dismissal of your bankruptcy case or even sanctions by the court.
Taking on New Debt
It can be tempting to take on new debt or make significant purchases before filing for bankruptcy, but doing so can have severe consequences. Any new debt or purchases made within 90 days of filing for bankruptcy can be considered fraudulent, and the debts may not be discharged in your bankruptcy case.
To summarize, the process of filing for Chapter 7 business bankruptcy can be intricate and challenging. However, by avoiding common mistakes and working with an experienced bankruptcy attorney, you can increase your chances of a successful bankruptcy filing and a fresh start for your business. Don’t hesitate to reach out to an experienced bankruptcy attorney for guidance on your specific situation.