When you started your business, you never imagined reaching the point of considering bankruptcy. While it’s nothing to be ashamed of, filing for bankruptcy as a business owner can have far-reaching effects that may make it harder for you and your company to recover even as it wipes away most of your debt. You need to understand the downsides of filing before you start working with a business bankruptcy lawyer in Milwaukee. Here are a few potential pitfalls you need to be aware of.
It May Result in Loss of Property
When you declare bankruptcy for your business, the property and equipment you use to run your business can be used to settle your debts. This is especially true of that property is securing a loan or other line of credit. The bankruptcy can trigger the seizure of that property and the trustee can sell that property to help repay your debts. This can put a halt to your business’s operations and force you to buy new equipment if you want to open your doors again after the bankruptcy is complete.
Bankruptcy May Not Settle All of Your Debts
Unfortunately, bankruptcy won’t settle all of your debts. If your business owes back taxes or you’re a sole proprietor who has medical bills, student loans, and other similar types of debt, filing for bankruptcy won’t get rid of it. You’ll still be required to make payments on those debts until they’re paid off in full. If these debts are the reason you’re struggling financially, you’ll want to explore other options.
It Can Tarnish Your Reputation
Filing for bankruptcy is a matter of public record and it will stay on your credit report for years after the filing is complete. This can tarnish your reputation and cause vendors and other partners to think twice before working with you on future endeavors. If you’re worried about preserving your network of vendors and partners, bankruptcy may make working with them in the future more difficult. Keep in mind that difficult doesn’t mean impossible. Some vendors may be understanding, especially if you were in good standing with them at the time that you file.
The Process Can Take a Long Time
Bankruptcy isn’t an overnight process. You may have to navigate the process for several months before you’re able to settle your debts and get the fresh start you’re looking for. The best thing you can do to speed the process up is to stay in close contact with your bankruptcy lawyer. The more communicative you can be and the more receptive you are to their advice, the easier it will be for them to submit the necessary documents and provide the court with the information it needs to process your bankruptcy quickly.
Your Credit Score May Take a Hit
Filing for bankruptcy can impact your business’s credit score and your personal score at the same time. That change in credit score can make it harder to borrow money if you want to open a new business. Keep in mind that the dip in your credit score won’t last forever. Your bankruptcy will eventually fall off your credit report.
Consult With an Attorney
Filing for bankruptcy as a business owner can be stressful, but you don’t have to go it alone. Partner with an experienced bankruptcy lawyer in Milwaukee who understands what business owners are going through. Contact Kerkman & Dunn Attorneys at Law today to schedule a consultation.