How Creditors are Consolidating Businesses Though Bankruptcy Substantives

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It is said that no one is exempt from the law, this includes businesses which are often so readily targeted by those looking to pursue a lawsuit. The matter of corporate-level law is a delicate one that requires the expertise of a licensed attorney for mediation services. Without a firm grasp of the law, some businesses could expect to lose a lot more than face following a civil lawsuit.

The Threat of Civil Lawsuits

Employees and guests can fall victim to injury in the most unexpected of ways. Employees that work where there is poor air quality or a lack of circulation may be diagnosed with respiratory and heart disease due to toxic air particles. Nearly half of all Americans are worried about indoor and outdoor air quality, yet they may place the blame on what they would cite as poor work conditions. Other potential grounds for a civil lawsuit against a company is an injury sustained while on the job; many companies are forced to payout workers compensation unless they can prove that it was the employee’s own negligence that resulted in the accident. Product liability cases could also pose a severe threat to the livelihood of a business. Back in 1962 as many as 11.5% of federal civil cases went to trial; experts today say that only around 1% of civil cases ever go to trial due to settlements. Businesses that are unable to reach a settlement and are found guilty may be forced to pay fees that could lead to the untimely demise of the business due to bankruptcy.

Filing for Bankruptcy

There are few things harder than having to file bankruptcy for a business. Deciding how to file for bankruptcy will determine a lot about the future of your company. Businesses and individuals alike have the option to file a Chapter 7 bankruptcy; in the case of a business with a sole proprietor both the individual and the business are considered the same legal entity. In a Chapter 7 bankruptcy the individual forfeits all assets to creditors to be liquidated including the business to discharge the debt. Many businesses instead opt for a Chapter 13 bankruptcy which allows them to make monthly payments on the debts; this is why a Chapter 13 is typically referred to as a “wage earners” bankruptcy. If your business can thrive and make the payments, a Chapter 13 may be the best direction to file for bankruptcy.

What is a Bankruptcy Substantive?

A bankruptcy substantive is a way for creditors to double
down on similar business bankruptcies in order to benefit both themselves and the individual filing for bankruptcy. A bankruptcy substantive occurs in situations where an individual has two businesses for example and runs the first one into debt, rather than bankrupting the first business a creditor may opt instead to have the second business enter into an involuntary bankruptcy so that both entities assets are combined into a single bankruptcy estate. In the case of multiple debtors, a creditor may look into a bankruptcy lawyer in order to establish a bankruptcy substantive to bring two debtors into the same case.

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