Corporate Bankruptcy Attorneys in Texas

Corporate bankruptcy law in Texas is intended to provide an equitable and fair balance of the needs of the debtor and the creditors. It is designed to allow individuals and entities (businesses, corporations, partnerships, trusts, even individuals, etc.) a “fresh start.” To do so, upon a bankruptcy filing, an automatic stay goes into effect stopping, with some notable exceptions, all collection and recovery activity against the debtor.

The bankruptcy “fresh start” is intended to assist debtors who are honest or acting in good faith. The United States Bankruptcy Code has a priority payment scheme that requires payments to be made to particular types of creditors in a particular order. At the end of the line is the debtor. Whether the debtor can reorganize restructure, or keep at least some valuable assets, or whether the creditor can receive as close to the amount of money it is owed, is the job of bankruptcy attorneys and creditor rights attorneys who regularly practice bankruptcy law.

Ongoing businesses facing a slowdown in income generation and increasing business debts need time to determine the best way to move forward and stay profitable. Smart managers realize they should see a Texas corporate bankruptcy attorney before the storm clouds appear to ensure that their company is poised to survive a bankruptcy filing. Too often, people turn to bankruptcy counsel at the last minute. While business bankruptcy lawyers may assist at this point, the business owners should see a corporate bankruptcy attorney early in the process. Most bankruptcy attorneys would like to have a three-month window to be able to prepare for a bankruptcy filing.

Texas Bankruptcy cases generally move quickly. A creditor or other person interested in the bankruptcy case must obtain knowledgeable counsel immediately after learning the case has been filed—and sometimes at the first hint of a filing, or that person’s rights and property interests could change rapidly—and not to the benefit of the creditor.

To navigate financial restructuring and reorganization successfully, businesses need to seek the expertise of a corporate bankruptcy attorney in Texas early in the process. This preemptive step is particularly crucial when a business anticipates potential financial difficulties. Engaging legal counsel well in advance allows for the development of strategic solutions that can prevent the need for formal bankruptcy proceedings, optimizing outcomes for both the debtor and its creditors.

For businesses facing financial strain, there exist legal frameworks that enable them to manage business debt effectively while maintaining control over their operations and assets. This approach involves the careful crafting of reorganization plans that aim to satisfy creditors’ needs while ensuring the business’s viability. Legal professionals are key in facilitating these plans, offering guidance on negotiations, and, if necessary, representing the business’s interests in legal proceedings to ensure continuity of operations.

A crucial aspect of this process is understanding which business activities can proceed without direct oversight from legal authorities, particularly those considered within the “ordinary course of business.” This distinction is vital for making informed decisions regarding the management of business assets and addressing business debts.

Additionally, in the context of resolving disputes related to business debts or operational challenges, the expertise of Texas business bankruptcy lawyers proves invaluable. They assist in arbitration or mediation, focusing on achieving strategic goals and steering the business toward a resolution that aligns with its long-term interests.

As a business owner, facing the challenge of unpaid invoices by customers, clients, or contractors can significantly impact your profit margins. Securing the services of a skilled collection attorney becomes crucial in such scenarios to maximize recovery from non-paying parties. In Texas, there are several legal avenues for debt collection, aligning with the specific needs of businesses facing such financial hurdles. The team at Ritter Spencer Cheng PLLC is proficient in strategies such as asset attachment, garnishment of bank accounts and property, asset marshaling and sequestering, and implementing turnover and receivership orders to enforce debt collection.

This approach is particularly beneficial for addressing business debt and navigating the complexities of small business bankruptcy, where the preservation of personal finances and personal assets is of utmost concern. The bankruptcy process introduces additional layers of personal liability, underscoring the importance of expert legal intervention to devise debt relief solutions that safeguard the business owner’s interests. By leveraging their expertise, collection attorneys and creditor rights attorneys play a pivotal role in mitigating the financial strain on businesses, ensuring a strategic recovery of owed funds while minimizing the impact on the owner’s financial health.

When a Texas business or individual learns that a debtor has filed for bankruptcy, there’s immediate concern about the recovery of funds. To pursue a distribution from the bankruptcy estate, creditors generally must file a proof of claim. The Bankruptcy Code describes a “claim” as:

A) A right to payment, regardless of its status—be it judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.

B) A right to an equitable remedy for breach of performance if it results in a right to payment, irrespective of whether this right is judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.

This definition ensures that any potential lawsuit against the debtor that could result in a monetary judgment qualifies as a claim, generally necessitating the filing of a proof of claim.

The intent behind this broad definition is to centralize all disputes with the debtor within the bankruptcy court. Creditors must submit their claims by the bar date. The Code prioritizes certain claims, such as those for domestic support obligations, employee wage claims, business reclamation, customer deposits and taxes, above others. The priority system affects the payout to unsecured creditors, often reducing their recovery.

Claims can be objected by trustees, debtors-in-possession, or other creditors. When objected to, the creditor must substantiate their claim. Our team regularly manages proofs of claim and the objection process, ensuring creditors’ rights are represented effectively in business bankruptcy, small business bankruptcy cases, and in the pursuit of debt relief while protecting personal assets against business debt.

In Texas, corporate bankruptcy cases involve several lawsuits related to the bankruptcy case or downfall of the debtor. Often, a debtor is sued before filing bankruptcy. Certain of these lawsuits can be moved to the bankruptcy court by administrative order. Other lawsuits are subject to determination in the state or federal courts. As a result, the court handles the bankruptcy case as well as the adversary proceedings associated with the case.

Adversary proceedings range from collection matters, lien disputes, injunctive relief, and statutory voidable transfer proceedings. Personal injury suits where insurance is available to provide for the injured party are generally not tried in the bankruptcy court.

Another type of adversary proceeding involving primarily individual debtors is the objection to the discharge or objection to the dischargeability of a particular debt. A creditor may want to file an objection to the dischargeability of a particular business debt if the debt is based upon a certain category of claim. For instance, if the debt is based upon fraud, or a false financial statement, fraud while acting in a fiduciary capacity, larceny, embezzlement, or for willful or malicious injury, you may have a right to object to the dischargeability of such debt. If you are successful in such a suit, then such debt will not be discharged and you can continue to seek collection of the debt against the debtor after the business bankruptcy filing.

Creditors may also file adversary proceedings objecting to the discharge of the debtor in general if the debtor has been dishonest in his statements to the bankruptcy court, including in his schedules and statements of financial affairs. The debtor is often given the presumption of acting in good faith, but facts may exist that cause this presumption to be overcome.

Have you received a letter or been sued by a trustee or a debtor to recover funds that you were rightly and justly paid? This letter was sent under preference avoidance law. Debtors and trustees often seek the return of money that was paid before the bankruptcy was filed. The bankruptcy laws were designed to put everyone on the same playing field, so one creditor who receives payment for the goods or services provided, and later learns that the paying company filed bankruptcy, may expect to be sued to disperse the money or assets among debtors.

One of the biggest benefits of filing a bankruptcy case is the automatic stay. Once a bankruptcy case is filed, either voluntarily or involuntarily, the automatic stay is imposed upon all acts to collect against the debtor, with some exceptions. The automatic stay is designed to give the debtor a temporary respite from actions to collect or take the debtor’s property. Foreclosures are stopped and other actions against the debtor are stopped.

A creditor’s intentional or knowing violation of the automatic stay can result in damages, fines, sanctions, and attorney’s fees paid to the debtor. A knowing violation of the automatic stay can be prosecuted even if the debtor did not have a right to the property. All that is required to violate the automatic stay is to seek relief against the debtor when the debtor has an “arguable right” to the property. The reason for the breadth of the automatic stay is simple: the bankruptcy system would not function if the debtor, who is usually down on his luck when the bankruptcy case is filed, was required to litigate whether the automatic stay was violated after the property is taken.

If the debtor is involved in a lawsuit with other parties, the other parties are often unable to prosecute actions without lifting the stay. Many personal injury lawsuits may be stayed by a corporate bankruptcy filing, but in the event, that insurance is available to provide a remedy to the injured parties, then the prosecuting attorney can generally seek relief from the automatic stay to continue the case.

At Ritter Spencer Cheng PLLC, our focus is on guiding clients through corporate bankruptcy efficiently, ensuring legal compliance and optimal outcomes. We specialize in restructuring advice, creditor negotiations, and asset protection, dedicated to securing a strong recovery path for businesses. We aim to deliver strategic legal solutions that facilitate a fresh start for our clients.