Common business bankruptcy mistakes to avoid

Chicago is known for many things, and a thriving corporate climate is certainly one of them. The city is home to major international corporations as well as many local companies. According to World Business Chicago, several factors indicate that businesses in Chicago are continuing to grow, but there are still many others that face financial struggles and debt. If you are considering bankruptcy as an option for your business, you should be sure to avoid these common mistakes.

Don’t make preferences in your payments

If you are considering bankruptcy, you may still be trying to make payments on debt and pay back loans that you have received. In bankruptcy, however, loans from people such as friends, family and business associates are liable to be considered gifts and a repayment may be considered a preference payment. Making payments like these is typically tricky, though, and could be considered fraudulent.

Don’t blow money on luxuries

When faced with impending bankruptcy, some people make the mistake of spending company money on luxurious goods. Whether it is as small as a piece of jewelry or as big as a new car, purchases such as these are very unwise to make when you are preparing to file. The debt is likely going to be considered fraudulent, and if so, it will not be discharged in court.

Don’t make unnecessary payments

Bankruptcy typically allows debtors to discharge some or all of their unsecured debt, but secured debts remain intact more often than not. If you plan to file and are still struggling to make payments on all of your bills, it is best to address those that cannot be discharged and wait to make payments on unsecured debts. This should only be done if you are positive such debts will be discharged, though.

These are some of the many mistakes you should avoid in bankruptcy. You can learn more about your options for filing by reaching out to a bankruptcy lawyer.

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