Can a Bankruptcy Filing Help You Save a Business?

Can a Bankruptcy Filing Help You Save a Business?

If your business is facing hard times, you may be inclined to shut it down, declare bankruptcy and give your creditors what you can. But bankruptcy can often be a way to save a business, particularly if the market’s starting to turn and you just need some time to get into the black. A Chapter 11 bankruptcy petition can do more than simply make your monthly payments more affordable. It can buy you that precious time without a lot of cash going out, where you can finally right the ship.

The Benefits of a Chapter 11 Bankruptcy Filing

When you seek to reorganize your business debt under Chapter 11, you’ll get the immediate and immense benefit of the automatic stay. The automatic stay prevents creditors from calling, writing or taking legal action to collect on any debt, other than through the bankruptcy process. You won’t have to deal with continual calls or threatening letters, and all legal proceedings will be suspended until your bankruptcy filing is complete.

In addition, once you file for Chapter 11 protection, you’ll have a certain amount of time to work out new payment arrangements with all of your creditors. Often, you can negotiate new arrangements that involve the waiving of fees and penalties, and work out payments that significantly reduce your monthly outflow.

You’ll usually be allowed to continue regular business operations while in Chapter 11, but you will have some restrictions on business activity without permission of the bankruptcy trustee or the court. For example, you may be prohibited from taking on new debt or buying or selling certain assets without the approval of the bankruptcy court.

It is never too early to consider these options. Chapter 11 is risky and expensive but may well be worth it. A high percentage of small businesses in Chapter 11 will fail, but with proper advance planning, the chances of success are much higher.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, weprovide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Can Student Loans Be Discharged?

It’s getting to the point, for many, where the cost of a college education is one of the biggest of life’s expenses, greater even than the cost of a home. Not surprisingly, as many college graduates struggle to find good jobs, many consider bankruptcy as an option to get their finances under control. The key question—can student loan payments be discharged in a federal bankruptcy filing?

Though many people don’t know it, there are limited circumstances where student loan payments can be wiped out under the bankruptcy law. Under what is known as the Brunner test (so named because of the U.S. Supreme Court case that laid down the principles for discharge of a student loan), you can discharge student loan obligations if you can demonstrate that repayment would cause you an “undue hardship.”

Under Brunner, a debtor can eliminate student loan debt by showing all of the following:

  • The debtor does not have sufficient income to maintain a minimal standard of living for himself/herself and dependents
  • The debtor has no reasonable prospect that the current financial situation is likely to change
  • The debtor has made a good faith attempt to pay off student loan debt

It’s important to understand that, without evidence to the contrary, most courts will presume that a debtor’s income will increase over time and that a debtor will be able to attain a minimal standard of living. Accordingly, any debtor seeking discharge of a student loan payment will need to affirmatively demonstrate that his or her situation is not likely to change. A debtor may introduce the following types of evidence to support that claim:

  • A mental or physical disability
  • Lack of education or training
  • Poor quality of education
  • Lack of job skills
  • Age of debtor

Exploring the options for income based repayment or discharge of student loans through various federal programs is a good idea and also a necessary first step. You can find information about what types of loans you have at this site: https://www.nslds.ed.gov/nslds/nslds_SA/. Information about federal student loan forgiveness and cancellation can be found here: http://studentaid.ed.gov/repay-loans/forgiveness-cancellation

If you resort to a bankruptcy, discharging student loans will require that you file a “bankruptcy lawsuit” in the bankruptcy seeking a judgment of dischargeability.  Achieving success is possible, but difficult at present. Hopefully courts or Congress will find a way to ease the path to dischargeability.

Contact Neuner & Ventura, LLP

We understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. We offer a free initial consultation to every client. For an appointment, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients Across South Jersey

Revel CEO resigns weeks before expected bankruptcy filing

Recent news of Revel Atlantic City CEO Kevin DeSanctis’s resignation has brought even more attention to the failing company and its imminent bankruptcy. The $2.4 billion resort is filing for Chapter 11 bankruptcy in order to save the company and wipe clean some of the debt that has been piling on. Unfortunately, the young casino has had difficulty bringing in gambling revenue in Atlantic City and has been unable to fulfill the high expectations of the casino market. Full article.

This bankruptcy filing shows that businesses large and small can run into trouble from bad luck, poor planning, or market conditions. See my article on ways businesses can avoid bankruptcy. However, when a business is in trouble, the biggest mistake owners make is not forming a workout or exit strategy early enough. As with so much else in life, timing is everything. So often, I see businesses that could have been saved had someone sat down to do some serious planning, including consideration of a bankruptcy, orderly liquidation or workout, much sooner.

For businesses, the options include an orderly liquidation, secured creditor workout, chapter 7 bankruptcy, or a chapter 11 reorganization. Each of these have risks and costs, as well as benefits. Careful planning including a detailed look at cashflow and opportunities to reduce expenses or strategically increase revenue is critical. Just as importantly, businesses need to have a multi-prong series of exit strategies. Not planning is a recipe for disaster. All this needs the advice of an experienced business bankruptcy specialist.

We have seen that many business owners delay considering these matters because they fear the personal consequences of a business bankruptcy or shut down. These can include loss of income from the business, loss of an enterprise they have put their heart and soul into, or personal liability. Many have given mortgages on their homes or have personal liability for bank debt and possibly payroll or sales taxes. But ignorance is not bliss. Things do not get better by ignoring them.

Careful planning requires that the individual owners know the options they face personally. At some point, in order to preserve the confidentiality of their discussions, it may be advisable that the individual owners have their own attorney separate from the corporate or business attorney. Options to be explored are workout strategies as well as bankruptcy. Here, the right advice is essential so that the owners can minimize or avoid future problems. The traps are many and easy to fall into.

For both businesses and their owners, being in financial trouble is scary and overwhelming. Hiring the right attorney to help you to plan and guide you through the options and choices is essential. The right attorney can help business owners take back control. There is no substitute for experience. Advice and representation from qualified legal counsel is the best money that can be spent.

Neuner & Ventura are experienced attorneys federally recognized as a debt relief agency helping people obtain debt relief using bankruptcy and other means. As a long-time business bankruptcy specialist, Steven R. Neuner has the background needed. Please contact Neuner & Ventura at (856) 596-2828 for a consultation.

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