How Does Chapter 11 Bankruptcy Help Businesses?

Bankruptcy is a procedure in which consumers or businesses can repay some or all of their debt on a reasonable plan, and in some cases, eliminate their debt entirely. Declaring bankruptcy guarantees the safety of your belongings, protecting you against the actions of any creditors you may have.

For business owners, the most common form of reorganization bankruptcy is Chapter 11, which is a complicated process. Those planning to file this kind of bankruptcy are strongly encouraged to hire an experienced bankruptcy attorney.

An Attempt to File For Chapter 11 Bankruptcy Gone Awry

Dean Smothers, owner of a Washington DC nightclub called Love, recently had his venue shuttered by the DC Office of Tax Revenue (OTR) after a bewildering series of twists and turns.

For several years, Smothers turned hefty profits. At some point, however, the impresario fell behind on taxes, plunging him into a seemingly never-ending nightmare.

The problems began when Smothers filed tax returns without actually paying the back taxes he owed. When the OTR sent a demand for payment, he requested a short extension. It seems that Howard University was about to hold its Homecoming festivities at Love, an annual event that usually netted the bar between three hundred thousand and half a million dollars.

The OTR refused to grant an extension. In a frantic plan to delay foreclosure, Smothers filed for Chapter 11 bankruptcy.

On the afternoon of the University’s night-time festivities, Smothers was visited by an OTR collections officer, who again demanded payment. Smothers attempted to negotiate by promising a large cash payment the following Monday, after the college bash. The OTR agent refused, changed the locks, and closed down the club.

“Since we got shut down, we didn’t have the big … Howard Homecoming weekend that we thought. We fell behind with the bank as well, and the bank started to foreclose.”

Desperate to save the club, Smothers contacted its former owner, who introduced Smothers to bankruptcy attorney Kim Johnson. She implied that she could slow the foreclosure while Smothers found financing.

Johnson then attempted to sell the property without first gaining approval from Smothers. She actually closed a sale at a price that was several million dollars less than Smothers’ original purchase price.

Smothers filed several motions against Johnson to halt the sale, contending she had never been hired as his attorney, and in no way represented the business. “But she continued to talk on our behalf,” Smothers said. “Even after I told the judge several times that she doesn’t represent me, he continued to let her speak, and didn’t address my desire to seek legal counsel.”

My Business Is In Trouble and I Need a Washington DC Bankruptcy Lawyer

This is a very unusual story, and a qualified bankruptcy attorney is able to protect businesses when bill collectors come calling. The earlier you seek help, the better options you may have to get your business back to being profitable.

A Washington DC bankruptcy lawyer can tell you more about tax debts and how bankruptcy can affect them. If your business is facing serious debt issues, contact us right away. Our attorneys can assess your situation and tell you how a Chapter 11 bankruptcy could work for you.

Your gateway to financial freedom.

Free initial phone consultation. Located near the Navy Memorial/Metro Station.

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