Raleigh Bankruptcy Attorney for Customer Claims and Lawsuits

If a customer filed a claim or lawsuit against you, contact Bradford Law Offices, PLLC immediately. Filing for bankruptcy might be your only solution for paying the compensation they demand. You could face lawsuits by customers if your business doesn’t provide the service or product as promised or sells defective goods.

Facing a lawsuit can put a strain on your company. You might not have the finances to cover legal fees and associated costs. Many companies struggle to meet the requirements of handling a lawsuit from an unhappy customer. Even if the customer loses their case, you could end up with expenses you can’t afford to pay.

You could file for bankruptcy to protect your business, but it doesn’t necessarily stop the lawsuit from moving forward. It could pause the legal action temporarily. However, the bankruptcy court might force you to pay when you resolve your debt. Additionally, if you file for bankruptcy to intentionally avoid paying your customer compensation, you will likely face an unfavorable outcome.

Bankruptcy does offer some protection for business owners. It triggers an automatic stay to prevent creditors from coming after you for the money you owe and other parties from pursuing lawsuits against your company. However, the protection doesn’t last forever. Once your bankruptcy case ends, the lawsuit could continue and result in a judgment against you.

At Bradford Law Offices, PLLC, our Raleigh business bankruptcy attorney knows the implications of facing lawsuits. When a customer sues you for any reason, it can negatively affect your reputation and cause other customers to take their business elsewhere. We are ready to help you protect your company and assets and find a way to get you on the path to a better financial future.

For a confidential consultation, call us at (919) 758-8879 right now or reach out to us online.

Common Customer Claims and Lawsuits Against Businesses

People file lawsuits against companies for a range of reasons. Whether the business is responsible for causing someone’s injury or breaches a contract, various parties can pursue legal action for compensation. If you can’t afford legal fees or pay a large settlement to a customer, it becomes a burdensome situation. Filing for bankruptcy could give you the time to review your finances and determine the right solution to resolve the legal matter.

Two types of claims and lawsuits customers often file against businesses include:

  • Breach of contract – When a customer hires you, they expect you to deliver on your promise. Whether implied or written, a contract is an agreement between two parties. You might sell clothing to online consumers or take on construction projects for commercial and residential properties. If the customer pays you and you fail to provide the goods or service they expect within the required timeframe, they could file a lawsuit against you.
  • Product liability – Product liability is an area of law that holds a manufacturer, seller, or distributor liable for providing a consumer with a defective product. Your customer could sue your business if the product you make or sell causes an injury.

Lawsuits filed against businesses by customers are typically heard in civil court. You don’t face criminal charges. However, you could be subject to financial penalties. If the judge enters a judgment against you, you must pay what the judge says you owe the customer.

Types of Bankruptcy Available for Customer Claims and Lawsuits

There are multiple bankruptcy options you can choose from when facing a lawsuit by a customer. Many companies, especially small businesses, don’t have the cash on hand to settle civil cases. If you can’t afford to pay the customer, you could file for bankruptcy to protect your business and stall pending litigation while you get your finances in order.

The three primary types of bankruptcy you can file as a business owner are:

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is known as liquidation bankruptcy. It’s available to various business structures, including:

  • Partnerships
  • Limited liability companies (LLC)
  • Sole proprietorships
  • Corporations

When you file for Chapter 7, you must liquidate your assets to satisfy your debt. If you face a lawsuit judgment, you might be able to wipe out the debt you owe by filing for bankruptcy.

Filing for Chapter 7 is most beneficial for companies planning to terminate operations. Selling assets you depend on to run your business could prevent you from continuing to provide goods and services. You should only pursue this type of bankruptcy if you’re ready to close the doors to your offices for good.

Once you file for Chapter 7 bankruptcy, the court will issue an automatic stay. This prevents creditors from pursuing collection actions against you for the money you owe for credit cards, loans, and other debt. More importantly, the automatic stay puts any lawsuits against you on hold.

You can’t file for bankruptcy to avoid providing compensation to your customer. However, you could pause the process temporarily until you get your finances in order. This can’t stop the customer from coming after you in the future, though. They could file a motion with the bankruptcy court to receive funds from the sale of qualifying assets.

You can’t file for Chapter 7 unless you pass a “means test.” The means test reviews your debt and income to determine which is higher. If your income exceeds your debt, you can use the capital you have to pay off some or all of the money you owe your creditors. However, liquidating your assets could resolve the problem if your debt is higher than your income.

Chapter 11 Bankruptcy

The same business structures can file for Chapter 11 bankruptcy as Chapter 7.

With Chapter 11 bankruptcy, you have a chance to reorganize your debt and submit a repayment plan. If the court already entered a lawsuit judgment against you and you can’t afford to pay, bankruptcy could give you the time you need to pay what you owe. The structured payments are available between a two and five-year term.

Filing for Chapter 11 also triggers an automatic stay like Chapter 7. You can prevent anyone from pursuing legal action against you during the ongoing period. Current lawsuits get placed on hold, and customers can’t initiate lawsuits against you until you resolve your bankruptcy case. Additionally, creditors are not allowed to take collection actions, such as repossessing property or garnishing wages to satisfy your debt.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is another type of reorganization bankruptcy. Individuals primarily file this type of bankruptcy. However, it’s also available to sole proprietors. You don’t qualify for Chapter 13 if you structure your business as a corporation, LLC, or partnership.

You can propose a repayment plan to the court to pay the money you owe over a period of three to five years, depending on the terms of the agreement. This allows you to avoid one lump-sum payment and restructure your debt into smaller monthly payments. You can also continue everyday operations and don’t have to sell your assets.

An automatic stay goes into effect once you file for Chapter 13. You protect your business by preventing the lawsuit from continuing temporarily so you can create a strategy to pay off your debt. Once you resolve your finances, your customer could pursue compensation with legal action. However, they can’t come after you during your pending bankruptcy.

Filing for Bankruptcy in Raleigh, NC

Facing a lawsuit can be stressful and overwhelming. Civil lawsuits aren’t about the amount of money someone has. It’s about whether the plaintiff suffered financial harm due to the defendant’s actions. Even if you don’t have enough money to pay a settlement to a customer, they could sue you anyway.

If you decide to file for bankruptcy, you must follow the steps below. With just a few differences, each step is the same whether you file for Chapter 7, 11, or 13 bankruptcy.

  • Hire a lawyer – Contact Bradford Law Offices, PLLC before you file for bankruptcy. We can review your case to determine whether you qualify and file the petition on your behalf.
  • Means test – If you file for Chapter 7, you must determine whether you’re eligible by taking the means test first.
  • List of finances – Create a list of all financial information regarding your business, such as assets, income, and liabilities. You should also include the amount of your debt and the parties to whom you owe money.
  • Repayment plan – Filing for Chapter 13 or 11 bankruptcy requires providing the court with a repayment plan.
  • Trustee – The court will appoint a trustee to manage your case. If you file for Chapter 7 bankruptcy, the trustee will decide which assets they can liquidate to cover your debts.
  • Tax documents – Give the trustee a copy of your most recent tax return. You must also provide tax returns every year during your ongoing case.
  • Hearing – The court will review all information and determine whether they approve or reject your petition.

Contact Us

If your business faces a claim or lawsuit by a customer, contact Bradford Law Offices, PLLC today. We might be able to represent you in your bankruptcy case.

Since 1996, we have fought to protect business owners like you. We will protect your rights and work to secure your future. Call us right now at (919) 758-8879 for a confidential consultation.