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Bankruptcy for Business Owners Facing Creditor Litigation


I have business clients who are being sued by their creditors on breach of contract matters for money owed. Invariably, they want to know what their best option is. Is it defending the suit? Is it letting them get a judgment? Is it filing for bankruptcy?

Some business owners have heard of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act, which modified some of the eligibility requirements for a filing of bankruptcy. The most significant change in that statute was the inclusion of the “Presumption of Abuse” criterion. Before 2005, any individual could file for bankruptcy, regardless of income. Now, if one’s income is above the median income for their state of residence, they are additional hurdles to clear in order to be eligible to file. These are not always easily navigated.

However, debtors whose debts are primarily “business expenses,” do not have to overcome the “Presumption of Abuse.” Business owners who make more than the median income for North Carolina but who still have liabilities that exceed assets and expenses that exceed income will have a much easier time gaining eligibility for bankruptcy protection.

If you are a business owner facing litigation from your creditors, there are options available to you. Maginnis Law, PLLC has attorneys can handle the creditor litigation, but can also counsel you on a potential bankruptcy options which may discharge any debt owed to those creditors who have filed suit. It maybe that defending the suit is your best course of action, but it may not be worth it. Maginnis Law can also counsel you on any potential claims that you might have against those creditors for violations of various debtor protection statutes like the Fair Debt Collection Practices Act and the North Carolina Debt Collection Act. It is important for business owners to be aware of all of their options and to discuss with their lawyer which strategy is best for moving forward.

If you are a business owner facing potential liability from your creditors, contact Maginnis Law, PLLC to schedule a free consultation to discuss your options. Maginnis Law is a litigation and bankruptcy law firm based in Raleigh with clients all over the Triangle, including Cary, Wake Forest, Rolesville, Leesville and Apex. Contact the firm at 919.526.0450 or go to our website at www.maginnislaw.com for more information.

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