Bankruptcy: Consider the consequences for you and your business

There’s a lot that goes into finding financial relief. Make sure you know what your options are.

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We asked the 2017 Top Lawyers in Northern Virginia at what point they should consider contacting a bankruptcy lawyer. Here’s what they had to say:


“A business facing financial distress can seek to restructure its indebtedness and reorganize its financial affairs under Chapter 11 of the Bankruptcy Code. A successful Chapter 11 reorganization requires the debtor to propose a plan that gets the consent of a majority of creditors and satisfies various legal requirements set forth in the Bankruptcy Code.
Financial distress often can be resolved without the need for formal reorganization proceedings. Business owners should consult with a competent Chapter 11 practitioner to evaluate their Chapter 11 and out-of-court options. Such consultation should occur long before the business runs out of cash or suffers adverse legal consequences. Don’t wait until a judgment is entered, garnishment proceedings have commenced or a foreclosure of real estate or other assets is scheduled. Whether the reorganization takes place in Chapter 11 case or out of court, early planning preserves options and generally leads to a better outcome.” –Bradford F. Englander, Partner, Whiteford Taylor & Preston LLP


“One should file [for] bankruptcy when it becomes necessary to take creditor collection actions and seek a permanent discharge of debts, which removes the legal obligation of having to repay those debts. The cons that must be weighed are some adverse credit reporting consequences and the requirement that some debtors will be required to turn over assets (to the extent that the assets are not exempt under the law) to the bankruptcy trustee for distribution to their creditors. Creditor collection actions would include a foreclosure against one’s home, repossession of a vehicle, garnishment of a paycheck or bank account, or even the filing of a lawsuit. The decision to file is based on one’s circumstances and the personal decision they reach when they conclude they need relief from such collection actions. Many individuals in bankruptcy do get to keep all of their assets. The exemption laws govern what assets may be retained by an individual in bankruptcy, and then the nonexempt assets are what creditors get to share pro rata. For example, in Virginia, one who is under 65 years old may be exempt up to $5,000 in cash. If that person has $8,000 in cash, then the law provides that they may keep the first $5,000 and their creditors get to share $3,000. The exemptions specify how much one may retain in their wearing apparel, furniture and household possessions, vehicles, wages, retirement plans, life insurance policies, et cetera.” –Steven B. Ramsdell, Partner, Tyler, Bartl, Ramsdell & Counts PLC

(2017 Top Lawyers, Advice from the 2017 Top Lawyers, December 2017)