A bankruptcy lawyer can help you avoid the worst

It's tempting to stick your head in the sand when bankruptcy looms, but that is the last thing a bankruptcy lawyer would suggest you should do, says David Sharrock of Sharrock Pitman Legal.

"In fact, if you act early and seek advice from a bankruptcy lawyer, you may be able to avoid the worst - or at least minimise the potential short- and long-term damage," he says.

Using a bankruptcy lawyer to understand the law

A commercial or bankruptcy lawyer can advise you on aspects of bankruptcy law, including your legal responsibilities as a business owner or company director.

For example, if your business is conducted as a company, then the directors need to be confident that the company can pay its debts. But if your cash flow is tight and bills remain unpaid, you could be headed for real problems.

"Directors are not generally liable for a company's debts, but if the company keeps trading while insolvent, then they may be," says David.

In a worst case scenario, you could even lose personal assets such as your home, should the company be sued successfully by its creditors.

Act early against bankruptcy

However, there are many steps that can be taken before bankruptcy becomes inevitable. And this is where getting information and advice from a bankruptcy lawyer is essential.

For example, you may be able to negotiate with your creditors to pay off your debts over time. In this case you'll need a bankruptcy lawyer to put a debt agreement or personal insolvency agreement into place.

A bankruptcy lawyer may also be able to help you avoid bankruptcy by getting your creditors to agree to partial debt repayment, on the basis that getting something back is better than nothing. (If you go bankrupt, they will get nothing.)

If the situation looks very bad and bankruptcy inevitable, then your lawyer will be able to advise you on whether something needs to be (and can be) done to protect your other assets.

Take the emotion out of the process

Emotions can run high where money is concerned, but bankruptcy is about much more than dollars and cents. "People often put their heart and soul into their business, so seeing it at risk of going to the wall is very sad and very stressful," says David.

Couple this with the fact that creditors often feel vindictive and you have a recipe for potential fireworks. Seeking bankruptcy information from an unbiased bankruptcy lawyer or other legal professional can help take the heat out of the process.

Life after bankruptcy

Even if bankruptcy proves unavoidable, there is life afterwards, says David.

"The usual period for bankruptcy is three years - this gives you breathing space and protection from your creditors. After that, you can establish a new business if you wish, hopefully having learned a few lessons along the way."

Of course, it's better to avoid the situation altogether, so act early and seek advice on bankruptcy law if you are worried about your business.

A bankruptcy lawyer can help can get you prepared for the worst, so talk with a local bankruptcy lawyer today to find out how they can help you.