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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
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Experience:  Bankruptcy professor.
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With some factors that could negatively impact my business,

Resolved Question:

With some factors that could negatively impact my business, I would like some guidance as to when and if it would make sense to fle for bankruptcy in Louisiana.
Submitted: 2 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 2 years ago.
Hi JACustomer,
Are you asking about filing a business Bankruptcy or a personal Bankruptcy?
Customer: replied 2 years ago.
We would be filing a business bankruptcy. We are organized as an LLC .
Expert:  cfortunato replied 2 years ago.

1) Is it your intention to close the business, or to keep it open?

2) Does the business have significant assets that can be sold?

Customer: replied 2 years ago.
It would be preferrable to keep the business open since we have an established registered trade name. I would be open to closing it entirely and reopening as another entity if there were benefits to doing it this way. We are in the Jewelry business and our inventory would make up the bulk of our assets. Our inventory is almost entirely sterling silver, so it has a melt value which will vary upon the current market price and can be easily liquidated. The inventory is worth several times more than melt value if it is sold in the regular course of business at wholesale. A quick guestimate might be that we have $400,000 in inventory valued at the wholesale level which is worth $150,000 if melted for silver content.
Expert:  cfortunato replied 2 years ago.

First you should know that debts cannot be discharged in a business Bankruptcy. The 2 business Bankruptcy options are "liquidation" - where the business assets are sold and the business usually closes - and "re-organization, where creditors agree to take less as payment in full for what is owed, and they agree to allow the business to pay them over time - up to a few years.

When creditors agree to take less, they look at what they can get otherwise - which is the total value of the business assets.

In this situation, Bankruptcy is beneficial to a business only if the total debts are significantly greater than total assets.

 

I think this is what you wanted to know. If not, please let me know.
Thank you!

 

Customer: replied 2 years ago.

So if total asset value is $100,000, what debt value would make bankruptcy an option. $125,000, $150,000, $175,000 ? What is a ballpark amount that could be expected for attorney fees for the bankruptcy process.

It seems that if the point of bankruptcy were to be freed of burdensome debts, wouldn't liquidation almost always make the most sense. If the entity wanted to continue it could purchase the needed assets at liquidation ( I assume auction) and start fresh with a new corporate entity ?

 

Expert:  cfortunato replied 2 years ago.

1) Any one of those figures ($125K - $175K) would make Bankrutpcy a viable option for your creditors, if your total assets could bring in only $100K.

2) If the entity has assets available to purchase the "needed assets at liquidation", those assets would also become part of the Bankruptcy estate, so could not be used to purchase the needed assets.

cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience: Bankruptcy professor.
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