Different Types of Business Bankruptcies
Posted on September 17th, 2013
Business bankruptcies can have lasting effects not just on the owner, but on employees as well.
Business bankruptcies can happen to any business at any time, so it’s important to know the different
types of business bankruptcy and how to handle them. Being informed ahead of time will allow you to
be prepared should your business face financial trouble.
Every business is different, and as such, bankruptcy for businesses is also varied. Common business
Liquidation or Chapter 7 Bankruptcy
This type of business bankruptcy is utilized by small businesses that lack a reasonable ability to pay its
debts. A trustee is named to sell all of the assets owned by the business and the proceeds are used to
pay any debts. After the liquidation of assets, any debts that remain unpaid are eliminated. Chapter 7
bankruptcy filings can cost anywhere from $2,000 to over $5,000, so it is often an option used by small
businesses because other filing options can be more costly.
Reorganization or Chapter 11 Bankruptcy
This bankruptcy filing is generally used by larger companies that do not want to liquidate all of their
assets but instead have devised a reasonable plan to reorganize their business. This can be more
costly—anywhere from $10,000 to over $50,000. This option is utilized by companies that feel the
business will recover after reorganization.
Repayment or Chapter 13 Bankruptcy
This option is usually used for personal claims, but for a sole proprietor, the owner files a repayment
plan with the bankruptcy court explaining how the debts will be repaid. This type of bankruptcy filing
generally costs from $3,500 to $10,000, depending upon the complexity of the business and the nature
of the debts.
Filing bankruptcy for your business can be a confusing and stressful time. Remember Skinner Law Firm is
here to be a resource during uncertain financial times.
Skinner Law Firm Welcomes Jason Ward
Posted on August 6th, 2013
Skinner Law Firm, LLC is excited to welcome Jason M. Ward, Esq. to the firm as an Associate Attorney. A Rock Hill, SC native, Mr. Ward graduated from The University of South Carolina School of Law in May 2012 and joined Skinner Law Firm this past December. Having previously served at McCarthy Law Firm LLC, the U.S. Bankruptcy Court of S.C., and Bassi, Edlin, Huie, and Blum Law Firm in San Francisco, Ward brings a depth of experience in bankruptcy, real property, and contract law to Skinner Law Firm.
In addition, Ward is actively engaged with the American Bar Association, Greenville Young Lawyers Association, the South Carolina Bankruptcy Lawyer Association, the Black Law Students Association and the Department of Juvenile Justice. His professional involvement in these organizations further showcases his dedication to providing top-quality counseling to his clients, making him a perfect fit for Skinner Law Firm, LLC.
Is It or Isn’t It Covered? Personal Exemptions When Filing for Bankruptcy
Posted on July 26th, 2013
When filing for personal bankruptcy, many believe that creditors will lay claim to all of your possessions in order to repay debts. However, within the U.S. and South Carolina law books, there are a set of laws commonly referred to as “asset protection.” These laws are put in place to make sure that people who have filed for bankruptcy can maintain certain assets.
There are two key provisions of asset protection; what property can and cannot be protected and who is able to apply for exemptions.
US bankruptcy exemption law includes protection for:
- A percent of wages
- Social Security benefits
- Civil Service benefits (such as working for the U.S. Department of Foreign Affairs)
- Veterans benefits
Within South Carolina there are additional exemptions:
- Homestead (real property including co-op) or burial plot exemption up to $53,375 with joint-owners allowed to double exemption to $106,750
- Cash or liquid asset exemption up to $5,625 in lieu of the homestead exemption
- Motor vehicles exemption up to $5,625
- Tools of trade (items necessary for employment) exemption up to $1,675
- Jewelry exemption up to $1,125
- Wild Card (any property from unused exemptions for homestead, burial, motor vehicle, personal property, or tool of trade exemptions) up to $5,625
An individual debtor must have an ownership interest in the property in order to claim any of the above excemptions.
Exemptions for alimony, child support, disability services, pensions, and life insurance are handled on a case by case basis. For any additional information on what exemptions you may qualify for, please contact Skinner Law Firm LLC.
4 Internal Causes of Small Business Bankruptcy
Posted on July 11th, 2013
For small businesses, there are many factors which can lead to bankruptcy. A large number of these factors are out of the business’s control, such as external market conditions, poor company location or a small customer base. However there are certain internal operations, which when poorly executed, can lead to bankruptcy.
1) Insufficient Planning
Many small businesses begin as the life-long dream of a professional who decides to leave the corporate world. Before opening a small business, potential owners should calculate start-up costs, as well as an operational budget for the first year. Owners should also plan for worst case scenarios, such as initial low business, potential slow seasons and unforeseen accidents.
2) Low Savings
Sufficient planning is as important as having the proper savings for opening and operating a small business. Owners should be prepared to have a proper cash cushion to keep the business afloat in emergency situations. It is recommended that owners set aside six months of savings for both the business and themselves before opening.
3) Lack of Financial Discipline
When businesses are faced with low income they sometimes turn to cheap, quick-fix schemes to generate business. Unfortunately, these frequently prove to be ineffective and a waste of precious capital. The costs of these quick-fix schemes often require additional loans which only increase the business’ risk of bankruptcy.
4) Poor Accounting
In an effort to save money, some businesses will steer clear of bookkeepers in favor of balancing the books themselves. Accounting is often pushed aside amidst seemingly more important elements of the business, leaving owners in the dark about their true financial state. Ideally, business accounting is the responsibility of one employee who can set aside time to communicate the business’ financial status to the company owner.
For more information about the causes of small business bankruptcy or how to responsibly plan for your small business, please contact Skinner Law Firm LLC.
Understanding Your Credit Score
Posted on June 24th, 2013
At first glance, credit scores can seem confusing and difficult to interpret. The commonly used FICO credit score, named after Fair Isaac Corporation, is based on a scale from 300 to 850 with the median FICO score falling in the 720-725 score range. But how are those scores calculated? FICO scores are comprised of five components: payment history, credit utilization, credit age, mix of credit and recent credit. The following are general guidelines for how each component is calculated and valued in an overall credit score.
Payment History (35%)
Payment History measures the timeliness in which various credit bills such as mortgages, credit card bills and auto loans are paid.
Bills paid on time can help improve credit score, while late bills can adversely affect credit score.
Credit Utilization (30%)
Credit utilization is the ratio of current debt to the prescribed limit of debt.
By limiting the amount of purchases paid with credit, the credit utilization ratio will drop, thus improving your score. Additionally paying off debts will lower the ratio and improve credit score.
Credit History (15%)
Credit history measures how long an individual has been with a certain credit company.
Longer credit histories improve credit score. Longer histories show the reliability of customers who pay their credit bills.
Credit Mix (10%)
Credit mix is determined by looking at the four different types of credit used: installment, revolving, consumer finance and mortgage. When determining credit score a more diversified credit mix tends to help improve credit score.
Installment credits – Have a fixed number of payments (i.e. student or automotive loans)
Revolving credits – Do not have a set number of payments (i.e. credit cards)
Consumer finance credit – Nontraditional loans (i.e. microfinances, pawns, or moneylending)
Mortgage credit – Used whenever a loan is secured through real property and a mortgage note.
Recent Credit (10%)
Recent credit measures how frequently an individual has looked for credit over a specific amount of time.
Generally, aggressive searches for credit or “rate shopping” can hurt credit scores.
While there is a rough formula for how credit scores are calculated, keep in mind that each credit score is case specific. For more information on credit scores or how to increase your credit score, please contact Skinner Law Firm LLC.