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| Linda Adams - The Clean Credit Queen™ |
| Small Business Owner |
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- 10 Things for Your Company to Think About Before Declaring Bankruptcy?
If your company is suffering from downturn in the economy, here are 10 things for you to think about before you declare bankruptcy. The
first five are things TO do. The second five are things NOT to do.
1. DO Be sure to keep paying your taxes. Taxes are one of the things that is not discharged in a bankruptcy. This includes payroll taxes as
well as all property and sales taxes. You can be held personally liable for these debts as well as for any penalties that are assessed.
2. DO Be sure and protect your checking and savings accounts. If your money is kept at the same bank that you owe a lot of money to,
you may find that they have pulled money from your bank account without your knowledge or any prior notice. This is called a set-off and
is legal.
3. DO Plan for the continuation of your insurance coverage. Insurance coverage may be impossible to find if you let yours lapse and then
try to reapply when you have really poor credit. If you keep yours up to date they cannot cancel it on you. They may not have to renew,
but hopefully by that time you will be in better financial shape.
4. DO Plan for cash flow problems. If you know things are not going well, cut your expenses drastically and stick to that budget. Make sure
you can pay the primary creditors, like taxes and critical costs of doing business but put off any bills that you can. Also try and collect as
much of any outstanding debt as possible to help stretch your dollars.
5. DO Return leased property. Any leased items that you can return, even if you owe more than they are worth, will help to reduce your
immediate bills. If you do this before declaring bankruptcy any amounts still owing will be discharged in the bankruptcy.
6. DON'T transfer business property. Creditors are wise to this trick and will search out any illegal transfers. This not only means a loss of
that property but it can also leave you will civil and or criminal charges in addition to the bankruptcy issues.
7. DON'T make preferential payments to creditors. You should pay all debts equally and the payments you make for a year before you file
will be reviewed for any discrepancies. Those creditors that have secured loans do have a right to that security if you are no longer paying
for it.
8. DON'T panic about utilities or your lease. Both are protected. The utilities can reasonably expect you to put down a security deposit to
insure you will continue to pay them but they cannot shut off your power or water. The same for your lease. If you pay on time they cannot
evict you just for having declared bankruptcy.
9. DON'T borrow from the company's pension plan. This is not your money and in most cases you cannot borrow it anyway. In other cases
you can but this is a bad idea. You may end up paying extra taxes if you cannot repay the load. Also penalties of up to 115% of the
amount borrowed illegally can be assessed.
10. DON'T lie about debts. If you lie about the financial condition of you company in order to borrow money, you could be personally liable
for those loans and they will not be discharged in any bankruptcy since they were fraudulent loans.
If none of the above work for you, and you do not want to declare bankruptcy, you might want to consider selling your business. It is not an
ideal solution but may allow you to start over.
Summary – If you have a small business and you're thinking about declaring bankruptcy then consider the list of things to do and don't do
before you decide on bankruptcy.
- Credit Article by Linda Adams - The Clean Credit Queen
Good Day and Good Credit
More small business credit information is available on the Products page under the credit category Small Business Credit Solutions
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Linda Adams, The Clean Credit Queen is not a registered investment advisor and the information provided on this website should be considered educational in nature, but it is not a substitute for legal or professional financial advice. If you believe you need the help of a Certified Financial Planner or other investment counselor, please seek a qualified professional. |
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