Small Business Bankruptcy in Illinois
When running a small Illinois business, you should always look on the bright side and appreciate the achievements your business has made. But on the other hand, it’s just as important, if not more so, to think about the problems your business can encounter (and how to avoid those problems), such as small business bankruptcy.
If your small business in Illinois is having trouble paying its bills, bankruptcy may help. Whether or not bankruptcy can help relies heavily on many things, such as
- if your business is a corporation, general partnership, sole proprietorship, or limited liability company.
- if you have personal liability for business debts
- if you want to close down your business or keep it going, and
- how much debt you have and what types.
If you consult an Aurora Chicago bankruptcy attorney, you can find out how to use Chapter 7, Chapter 13, and Chapter 11 bankruptcy to deal with business debts. Cutler & Associates, Ltd. is a bankruptcy law firm in the Chicago, Illinois area and has four locations in and around Chicago that specialize in debt relief. We have offices in various locations in the greater Chicago region, including Aurora, Oak Brook, Schaumburg, and Skokie. For a free bankruptcy evaluation, get in touch with us today at the location closest to you.
What Can You Do to Avoid Small Business Bankruptcy?
To avoid the same fate for your own small business, it’s a good idea to research the factors that lead other small businesses into insolvency.
Small business owners would do well to familiarize themselves with the most usual reasons why a business goes bankrupt so that they can anticipate potential financial problems in advance and take preventative measures.
What then are the most usual causes of failure for small businesses?
Some of the most usual causes for business failure are as follows:
- Overspending: If you are spending more on running your small business than you are making money, you will eventually go bankrupt.
- Excessive debt: Bankruptcy can happen once your business owes more money than it has in income, whether it be secured debt or unsecured debt, and you are unable to make payments. (As a business owner, it could also lead to your personal bankruptcy, based on your debt and if a personal guarantee was made.
- Mismanagement of finances: Having a lot of money coming in is no guarantee that you won’t go bankrupt if you don’t keep your financial house in order and waste money on unnecessary expenses.
- Hiring the wrong employees: The right people can take your business to new heights, and wise business owners are aware that their employees are the key to their business ’ success. But the reverse also is true: hiring the wrong employees may lead to financial ruin.
The fact is that there are a few reasons that small businesses usually fail, and as a small business owner, you must be aware of those reasons. Consult a professional, such as a bankruptcy lawyer or financial advisor, if you want more information on how to avoid having to file bankruptcy. They can advise you on the current condition of your small business and what can be done to keep bankruptcy at bay.
Your Debts Should Be a Priority At All Times
Paying your debts back is important for small businesses. If you fail to make payments, the creditors or lenders could sue you to get what’s owed, which can end in a bankruptcy filing.
So, if you want to keep your small business from going bankrupt, you have to pay all your creditors and lenders, as well as pay all of them before you do almost anything else concerning your business.
Make sure you are at least making the minimum payment on all of your business debts. Pay all those debts on time. If you’re having difficulty paying your debts, ask a professional about how to restructure your debt. In debt restructuring, your creditors will be able to help you come up with a way to pay off your debt obligations without filing for bankruptcy.
What does this all mean? Your creditors and lenders will not disappear. If you don’t pay back your debts, you will be forced into bankruptcy. So, paying your debt obligations on schedule should be your topmost priority, no matter how things are going in your small business.
Get Help From a Professional
We already have gone over this earlier, but getting professional advice is a must if you think your small business is about to go bankrupt. Still, it is possible to fall victim to shady operators. The basic sales pitch of “pay me a fee and I’ll help you get out of debt” seems counterintuitive, and an unscrupulous credit counseling agency can take advantage of people who are desperate for a quick fix.
Before you follow this road, recognize that the simplest—and likely most practical—credit counseling you can obtain is to close your wallet and cut your spending. Make sure to do an extensive study on your options for professional help if you still feel that more specific counseling is required.
What type of professional help you hire will depend on what kind of help you need and the financial status of your business. Some professionals who might be able to help you stay out of bankruptcy are
- Financial counselors. Working with a financial counselor can be helpful if your small business is just about to start and you want to set yourself up for financial success. Financial counselors help small business owners decide how to use their money in the best way possible. It can involve everything from giving advice on tax requirements (which can differ depending on how your business is set up, such as a sole proprietorship or a limited liability company) to controlling your cash flow to helping you figure out which accounts and/or tools are needed to handle your finances the best way.
- Specialist in debt consolidation. A specialist in debt consolidation might be able to help you if you already have a lot of debt. A debt consolidation specialist will look at your finances to figure out if it will be good for your business to consolidate all your debts. If so, they can help you combine all your debts into one loan with a favorable interest rate, allowing you to get out of your debt and get your small business back on track.
- Business bankruptcy attorney. If your business’s finances are really bad and it seems like bankruptcy is a real possibility, you should talk to a law firm that has business bankruptcy lawyers on staff. Bankruptcy lawyers look at the state of your business and your whole financial situation (which includes business assets as well as personal assets versus business debts and personal debts) to help you decide if filing bankruptcy is the right choice for your business. If you decide to file for bankruptcy, the lawyer will walk you through the bankruptcy process, assist you in filing for bankruptcy, and represent you in bankruptcy court. (Remember that the attorney-client relationship protects any private and sensitive information you tell your lawyer.)
Talk with Your Lender
A phone call can sometimes make a huge difference. Keep in close touch with all your suppliers and lenders, and be as honest as you can concerning your existing financial situation.
Request for lower monthly payments or easier terms to pay your debt. Tell them you’re considering filing for bankruptcy but looking for an alternative. They might be able to help you get back on your feet by setting up a payment plan.
In the same way, talk to everyone with a contract with you and try to negotiate better terms. Then, get more quotes for any services you use that aren’t covered by a formal contract.
At What Point Does a Small Business Declare Bankruptcy?
Business owners need to look in their hearts and look at their balance sheets. The first question to ask is, “Do I want to keep this going?” If your heart is no longer in it, call a bankruptcy lawyer to help you close down your business. But if you still think your business can make it, declaring bankruptcy might be a good option. Discuss this option with a good Illinois bankruptcy attorney.
Will a Filing of a Bankruptcy Petition Help Me Continue My Business?
Bankruptcy filings can help small businesses that are having trouble staying in business and even grow. Whether you are filing Chapter 7, Chapter 13, or Chapter 11 bankruptcy to help you keep your business going depends on:
- structure of your business
- what your company does
- the assets of your company, and
- how much income is available for a repayment plan.
Considerations for Continuing Your Illinois Business
Before you decide whether to continue running your Illinois business or to close it down, you should consider a few things. Here are some important things to consider.
- How much money does your Illinois business make? You created your small business so that you could make money. If your business is always losing money, it might be best to shut it down. But let’s say you own a business that makes money but is having trouble because of temporary situations like the economy. In this case, it might be best to continue operating and wait out the storm. But it’s important to be realistic if you want to stay open. Entrepreneurs are typically overly optimistic, pouring money into a business long after it is time to call it quits.
- What are the assets and liabilities of your small Illinois business? Are the assets of your business worth more than the liabilities it has? It’s pretty clear that your business might be worth saving if its assets are more than its liabilities and it is still making money. In bankruptcy, reorganizing debt or getting rid of it if you are a sole proprietor could be just what the business needs to stay afloat. You’ll find that we are the best bankruptcy law firm in Chicagoland and are kind, hardworking bankruptcy lawyers who care about what’s best for you.
- Are the debts of your business your personal responsibility? If you’re personally liable for your business’s debts, it might be more beneficial to continue operating it (without taking on more debt) while you negotiate with creditors. If the business does not have enough assets to meet its debts and you close it down, creditors may have no choice but to pursue after your personal assets. A business owner can also file for Chapter 7 bankruptcy and get rid of the personal guarantee.
Contact a Chicago Bankruptcy Attorney for More Bankruptcy Information!
Attorneys at Cutler & Associates, Ltd. work tirelessly to provide Chicago residents with representation in their efforts to find debt-relief. Our law firm has been around since 1990, and our lawyers have more than 30 years of combined experience helping people get their lives back on track after the strain and harm of having a lot of debt. Each member of our team has compassion for clients who have to make difficult decisions, like whether or not to file for bankruptcy.
You may have heard that bankruptcy is bad, but we can tell you that is not true. A struggling consumer can erase excessive debts and have a fresh start through bankruptcy. From the time you get your free case review until the end of the bankruptcy process, our lawyers will give you personal, confidential legal advice. Call Cutler & Associates, Ltd. or stop by our office today to talk to a Chicago bankruptcy attorney!