Bankruptcy is a dreaded word. Many Americans today associate it with being “broke and helpless,” but in fact, bankruptcy can be managed in bankruptcy court where the debtor may find debt relief. To be sure, no one looks forward to the idea of bankruptcy, but if the bankrupt party hires a low cost bankruptcy attorney in their area, this bankruptcy lawyer may help them in court and allow all parties involved to negotiate a productive deal. Declaring bankruptcy dos not have to be the end, especially when a low cost bankruptcy attorney is hired from a bankruptcy law firm to help defend their client. Rather, all parties involved in the court are effectively teammates addressing the common problem of the debt. Of course, the debtor party will bear the brunt of paying that debt, but finding practical debt relief is very much possible. Nothing is being guaranteed here, since every case is different, but a low cost bankruptcy attorney may help a client avoid further financial trouble and put together a good case for court.
Why Bankruptcy Happens
Bankruptcy may happen to either individuals or to companies large and small, and there are different chapters of bankruptcy that a party may file for. Chapter 11 bankruptcy is a common one, often used by smaller companies or more rarely, wealthier individuals. Companies that declare this bankruptcy type may have under $10 million in assets or liabilities, under $10 million in yearly revenue, and fewer than 50 employees.
Such a company might declare bankruptcy if their client or customer base dries up, or if that company has taken out some bad loans that it cannot easily repay. In other cases, however, this bankrupt company might be the victim of a crime. Cyber crime is on the rise, and this describes when criminals misuse computer technology and the Internet to steal money or sensitive information from other parties. Companies will typically have their own secure networks and firewalls, but some cyber criminals have the expertise to break into such secure systems and make away with a large sum of money, or at least bank account numbers, employee passwords, client or customer information, and more. Some managers today underestimate the prevalence and threat of such crime, but it is very real and the threat of it must be taken seriously. Managers may consult their IT professionals to bolster their security.
In other cases, a company may be bankrupt from a more traditional sort of nonviolent crime: white collar crime. In some cases, an employee may be embezzling money, or covertly diverting company money into their own pockets. In other cases, someone is committing stockbroker fraud, and may fool investors into making bad investments that they would normally avoid. These bad investments may drive a company or investor bankrupt, and of course such crimes are highly illegal. But they happen every year, and the debtor company may turn to a low cost bankruptcy attorney to help them in bankruptcy court afterwards.
Lawyers and Bankruptcy Court
When a company has declared bankruptcy, it may turn to local bankruptcy law firms and hire a low cost bankruptcy attorney who can represent and defend their interests in a court of law. Their expertise allows them to formally advocate their client’s position effectively and prevent mistreatment on the creditors’ part. So far, in the court case, the debtor company may be considered DIP (debtor in possession) if it has behaved transparently and honestly so far. The debtor stays open for business and retains its assets, but with the conditions that it may not take on new loans without permission, nor may it buy or sell property outside of its regular business practices. Violating these terms, or committing a crime, may result in a loss of DIP status.
The debtor will also be asked to create a reorganization plan, one that restructures and/or downsizes the debtor to make debt repayment easier. This may take a few months’ time, and when the debtor presents this plan, the court and creditors may accept it and set it into motion. If they do, the debtor may be partially or completely downsized or liquidated to ensure debt repayment to whatever extent is possible. In some cases, the creditors may have to accept only a partial repayment.