The Right Time to Hire a Bankruptcy Attorney

No person or company ever wants to face bankruptcy, but this financial situation is not necessarily the end. Many companies deliberately file for bankruptcy with the intent to find debt relief, and they often find it in bankruptcy court. It should be noted that the staff of a bankrupt company do not have to proceed alone; a bankruptcy attorney can be hired from a bankruptcy law firm to represent them, and a bankruptcy attorney can do a lot of good. These lawyers might help their client company avoid unfair actions by the creditors in court, and a bankruptcy attorney may help his or her client company explore feasible options for finding debt relief. When is it time to find a low cost bankruptcy attorney? And what tends to drive companies and people into such a financial situation to start with?

Why Bankruptcy Happens

Sometimes, a company may go bankrupt because its client and customer base dry up, or if an expensive marketing campaign fails to bring in as many customers and payments as necessary. Sometimes, bad management is to blame, but other times, theft is the real cause of bankruptcy. It should be noted that cyber-crime is on the rise, and criminals exploit the Internet to steal passwords, client information, and bank information from companies big and small. Famous hacker cases have made the news, when cyber-criminals broke into secure servers or Cloud data storage and made off with valuable information and money alike. Weak or absent cyber-security at a company can leave it vulnerable to such crime, which is why IT specialists are essential for any modern company. Otherwise, these hacker attacks can steal a lot of money from bigger companies, and smaller companies may go entirely bankrupt if they are targeted like this. After a cyber-crime takes place, a smaller company may find itself in serious debt. This is when bankruptcy might be declared, and a bankruptcy attorney can be hired to help.

Bankruptcy Today

Smaller companies and some wealthy individuals choose chapter 11 bankruptcy in particular when they are filing for debt relief in a court of law. Other chapters exist too, such as chapter 13 (which can cost as little as $500 to file in Texas) or chapter 7 (it can take about six months to complete). Meanwhile, chapter 11 in particular is popular among small companies and sometimes wealthy individuals. Most companies that file for this type of bankruptcy tend to have under $10 million in assets and liabilities, under $10 million in yearly revenue, and under 50 employees. And when chapter 11 bankruptcy is filed and the court case begins, a bankruptcy lawyer can be a real asset for the debtor the whole time.

What comes next? If the debtor has acted in good faith and honesty up to now, it may be considered DIP, or “debtor in possession.” This means that the debtor company may retain ownership of itself and continue to operate normally, but with some conditions attached. The DIP company may not take out new loans without the court’s permission, nor may it make major property purchases or sales aside from what takes place in its regular business. The debtor company may also face restrictions in hiring lawyers or using lawyers that it has on retainer. Violating these terms, or other acts of dishonesty, may cause DIP status to be revoked.

The court and the creditors will look over the debtor company’s assets and finances, and the debtor will be tasked with creating and offering a reorganization plan. That is, a plan designed to downsize and alter the company’s finances and other structures to make debt repayment easier, and a bankruptcy lawyer may help with the formulation of this plan. The debtor will have a time frame for developing this plan, though time extensions might be granted if requested. And when the reorganization plan is ready, the debtor company offers it to the court and creditors. Should it be accepted, it will be put into motion. And in rare cases, the plan may be rejected and the court of creditors will devise their own plan in its place. The final plan will allow partial or full repayment of the debt to whatever extent is possible.