If your company is facing a lawsuit for product liability, filing for bankruptcy might be the only way you can afford to pay the compensation the plaintiff demands. A lawsuit can create overwhelming financial issues for your business, even if the suit is ultimately unsuccessful. Yet you may not realize that you have options to protect yourself and your business. An experienced business bankruptcy attorney can help.
The Raleigh bankruptcy attorney at Bradford Law Offices understands how stressful it is for a company to face a product liability suit. The consequences for your reputation can leave lasting damage, leaving you wondering how you can possibly proceed. Our team is ready to equip you with a plan to protect your business, assets, and financial future. Call us today at (919) 758-8879 or contact us online for a confidential consultation.
What Is a Product Liability Lawsuit?
A product liability lawsuit allows a customer to hold a manufacturer, seller, or distributor liable for a defective product that causes harm to the consumer. If the plaintiff can prove that your company’s negligence caused them harm via a defective product, they can sue you for damages. The issue might be a design, manufacturing, or marketing defect.
A design defect is a flaw in the plan for the product’s creation. Design defects predate the product’s manufacture. Lawsuits based on design defects are particularly costly to a business because they can apply to every item a company has sold. If the injured party can prove that you could have used a safer design for the product, you may be liable for design errors.
A manufacturing defect occurs due to deficiencies within the production process. Unlike design defects, manufacturing defects generally affect a portion of the products on the market.
Your business may also be legally responsible for injuries occurring due to how you market your goods. For example, if you employ improper labeling or do not warn customers about your product’s potential dangers, you may face a marketing defect lawsuit.
Will Filing for Bankruptcy Help Me If I Am Facing a Lawsuit?
Unless you are a large corporation, your business probably does not have spare funds to settle product liability lawsuits. Filing for bankruptcy may be the only option small businesses have to protect themselves while litigation is pending.
Filing for bankruptcy can also prevent collection efforts and lawsuits from creditors. Until your bankruptcy is complete, you will have the protection you need to determine what steps to take to address the legal action you are facing.
There are some limited exceptions to the types of legal action bankruptcy can protect you from. For example, you may not be protected if your debts are based on fraud or if the plaintiff’s injury occurred due to willful or malicious action. Furthermore, bankruptcy may be unable to protect you from legal action due to environmental violations.
What Types of Bankruptcy Are Available for Product Liability Lawsuits?
If you are facing a product liability lawsuit, the three main types of bankruptcy available to you are Chapter 7, Chapter 11, and Chapter 13. While each of these options can offer protection from your debt obligations, their requirements vary.
Chapter 7 Bankruptcy
Also known as liquidation bankruptcy, Chapter 7 is the most common type. You can apply for Chapter 7 if your business is:
- A sole proprietorship
- A partnership
- A limited liability company
- A corporation
Filing for Chapter 7 requires you to liquidate your assets to pay off your debts. This type of bankruptcy is most useful if you plan to shut your business’s doors, as you will probably be unable to continue operating if you sell all your assets.
The court will issue an automatic stay once you file for Chapter 7, preventing your creditors from collection actions and putting any pending lawsuits on hold.
Chapter 11 Bankruptcy
Chapter 11 is available to the same business structures as Chapter 7. However, Chapter 11 does not require you to liquidate your assets. Instead, it allows you to reorganize your debt and form a payment plan. Creditors will not be able to pursue collection actions.
If you have already lost a product liability lawsuit, Chapter 11 can help you pay the amount you owe the plaintiff. However, if the suit is still pending, Chapter 11 will trigger an automatic stay to prevent legal action against you temporarily.
Chapter 13 Bankruptcy
Because only individuals can file for Chapter 13, you can choose this type of bankruptcy only if your business is a sole proprietorship. Chapter 13 allows you to form a repayment plan over the course of three to five years for your debts, allowing you to avoid a single lump-sum payment. This arrangement may allow you to continue your business operations because you will not need to liquidate your assets.
As with the other types of bankruptcy, filing for Chapter 13 enacts an automatic stay preventing product liability lawsuits from continuing.
Why Should I Hire Bradford Law Offices?
Danny Bradford has helped Raleigh residents and businesses with bankruptcy-related legal issues since 1996. During that time, he has represented over four thousand people and companies before the Bankruptcy Courts for the Eastern District of North Carolina.
Mr. Bradford is committed to helping those struggling to solve their challenging financial problems. He has the experience, skills, and knowledge to help you find a solution for your business during this stressful time.
Contact Bradford Law Offices Today
If you are dealing with a product liability lawsuit, your ability to navigate the situation successfully may depend on how quickly you consult with an experienced Raleigh business bankruptcy attorney. The seasoned bankruptcy lawyer at Bradford Law Offices understands the challenges of product liability claims, and our team can help you take the steps you need to protect yourself and your business. We will do everything in our power to help you find the most favorable solution possible.
Call Bradford Law Offices today at (919) 758-8879 or contact us online for a confidential consultation to learn more about your legal options.