3 Things You Should Never Do When Your Business Is Facing Bankruptcy

If your company is facing bankruptcy, know that you are far from alone, but you should contact a business lawyer regarding your next moves to protect yourself as well as your investors, employees, and customers. Going bankrupt doesn't mean that your reputation or relationships need to suffer when you do this ethically. Never make the following three mistakes is your business is facing a bankruptcy.

Don't Skip Tax Responsibilities

When you are dealing with a lot of financial problems, the last thing you probably want to think about is tax season. However, you must file your taxes before you file for bankruptcy. In fact, good record-keeping should be a priority, especially when you may face the end of your business and a bankruptcy. You need to be up front and clear about your financial situation and the reasons that bankruptcy is necessary.

Don't Invest in New Equipment or Software

When you are facing a bankruptcy, it's only natural to go into panic mode, and you may get the notion that maybe buying a new piece of equipment or software will suddenly turn your business around. If your company has gotten to the point where bankruptcy is looking like the best choice, one change is not likely to transform everything. You can make changes, but investing in big equipment or luxury items for your company will not look good during the bankruptcy proceedings, and you may anger those around you who saw you as sinking money into the company when it wasn't readily available.

Don't Ignore Your Creditors

Many company owners will start ignoring creditors if they are facing an inevitable bankruptcy filing. After all, they may wonder what the point is of paying when they are looking at such a big decision as bankruptcy. A late payment in the days before a bankruptcy may be seen as a logical option, but that is not a good idea. The collection agencies may contact you at work and otherwise embarrass you in front of employees. Once you do file for bankruptcy, let your creditors know about your intentions and refer them to speak to your lawyer with questions.

Finally, keep in mind that some business laws can vary from state to state, and you should contact an attorney before making any major moves during the time period before and during a bankruptcy filing. When your lawyer approves of the information that you're disclosing, try to be as up front as possible with all those around you, and you will find that people will likely be more understanding and accepting of future dealings with you.