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Entrepreneurs are optimists by nature. Recognizing there’s a problem is a big step in “entrepreneur rescue.” Next comes identifying the problem, then how to fix the problem, and finally, how to fix the fallout the problem created.
Your accountant can help by identifying the answers to the following:
Yes, answering a question requires asking several more. Then comes the triage question. Who has to be saved: the enterprise or the entrepreneur?
Regardless of the answers to these questions, the body debtor-collector and bankruptcy law foster the economic fixes to problems. Depending on each solution’s economics, the law creates opportunities and means for implementing a solution.
For example, New York law not only provides means for creditors to enforce judgments, but also protections against improper judgment enforcement. The Civil Practice Law and Rules offers protection from destructive creditors, while the Uniform Commercial Code enables lawfully transferring one entity’s assets to another.
If state law remedies don’t suffice, the United States Bankruptcy Code is a “tool box” of remedies which turns much of the law on its head. In most instances, just filing a bankruptcy case stops all efforts to collect debts immediately. It’s an economic “time out.” Then, the Bankruptcy Code provides for, among other things:
a.) rejecting burdensome leases or contracts;
b.) challenging taxes;
c.) voiding improperly filed liens;
d.) selling assets over a joint-owner’s objection;
e.) undoing cash flow-sucking shareholder buyouts;
g.) going public;
h.) contracting litigation;
i.) reducing and restructuring debt;
j.) centralizing litigation in one forum.
Then, add tax-free forgiveness of debt1.
For entrepreneurs in economic distress, the Bankruptcy Code and state law likewise provide means for preserving assets and reducing debt, including taxes. Plus, state and federal laws exempt certain types of property and income from judgment enforcement and creditors’ claims. Property or its proceeds can lawfully become unavailable for creditors, inside and outside of bankruptcy.
Nobel laureate Winston Churchill described success as “going from failure to failure without loss of enthusiasm.” 80% of all businesses fail. However, that does not mean the entrepreneur must fail or be crippled. Early awareness of problems translates to early resolutions. Like your body, unattended wounds to business fester and become debilitating through infection. Blockage of a cash-flow circulatory system can cause lethal financial ills.
1 Bankruptcy generally results in reduced debt through a discharge or consensual reduction. To the IRS this reduction of debt is income, generally referred to as “forgiveness of debt” income (“FODI”). FODI is generally taxable income. The two big exceptions are FODI: a.) resulting from a bankruptcy case; and b.) not benefiting a solvent person or rendering an insolvent person solvent. As folks in bankruptcy are not always insolvent. this is an important benefit.
Wayne Greenwald, P.C.‘s professionals have decades of experience solving individuals’ and businesses’ financial and legal challenges. As insolvency professionals, we often find solutions overlooked by traditional litigators and business lawyers. Accountants and lawyers, who respect our ability to effectively, creatively and economically solve the issues of businesses facing complex legal and financial challenges, frequently refer their clients to us.