If your business is struggling financially, filing for Chapter 11 bankruptcy may be your best option. When considering bankruptcy, there are three steps you should avoid:
1.) Getting further into debt. Do not take on new debt or further your existing debt. You should suspend all debt as soon as you file for bankruptcy. Creditors can challenge the elimination of your debt if they believe you ran up your credit-card debt expecting it to be forgiven through bankruptcy. Credit card debt may not be forgiven up to 90 days prior to filing for bankruptcy, meaning you will still be responsible for this debt.
2.) Borrowing from friends and family. If you borrow money or assets from a friend or relative, it is unlikely they will get their money back. In many cases, the bankruptcy court deems any money received from friends or family as gifts, meaning they will not be paid back. In addition, you do not want to give assets away before filing for bankruptcy. If you do, you will not get them back, they will be repossessed during the bankruptcy process.
3.) Avoid bankruptcy fraud. Overspending on your credit card and giving assets away before filing for bankruptcy are considered fraudulent. Do not take any money, assets or property from your business during the bankruptcy process. If you are caught committing bankruptcy fraud your debt will not be forgiven and you will face criminal charges.
If you avoid the three steps above, you will make the bankruptcy process easier and avoid criminal charges. Remember that bankruptcy was designed to help people. Bankruptcy relieves debt, ceases foreclosure and gives you a fresh start with financial freedom.