If you face legal action from a subcontractor and can’t afford to pay the money you owe, contact Bradford Law Offices immediately. We can review your case and determine whether filing for bankruptcy is the solution you need to resolve your debt.
Subcontractors are often essential to keep businesses going. You hire people to perform specific projects necessary to run your business. Those people might hire subcontractors to carry out the tasks of the job. For example, if you hire a construction company to build your offices, they will likely hire a plumber, electrician, and other individuals to help.
Business owners must pay the people and companies they hire to complete the work they need. Whether the contract stipulates that payments will be made during the ongoing project or once it’s finished, the subcontractor expects compensation for their time and effort. If you fall behind on these payments, the subcontractor could file a lawsuit against you, forcing you to pay what you owe.
At Bradford Law Offices, we understand the financial implications of debt on your business. You don’t want to lose the company you worked so hard to build. When you’re unable to fulfill your obligations, your only option might be to file for bankruptcy. Bankruptcy could protect your business and assets and give you the time you need to pay back the money you owe to the subcontractors. You won’t have to risk losing your business and could even end up in a much better financial situation.
Call the Raleigh business bankruptcy lawyer of Bradford Law Offices today at (919) 758-8879 to learn more about what an experienced bankruptcy attorney can do for you.
Types of Subcontractors for Businesses
Instead of bringing someone on as a full-time employee, many business owners will outsource and hire contractors to complete necessary projects. Sometimes, contractors can perform the work themselves, especially if it’s something small. However, contractors typically hire subcontractors who have the specialized skills necessary to perform certain tasks. Subcontractors are essential for providing the services, labor, or equipment the contractor needs to finish the project.
Common types of subcontractors hired for business projects include:
- Web designer to design or rebuild a website
- Carpenter to assist with a construction project
- IT companies and individuals to install software, safeguard confidential information, and troubleshoot computer issues
- Demolition crew to remove materials and waste from a construction site
- Event planners to plan and execute company events
- Landscapers to maintain the commercial property
Subcontractors usually don’t receive payment for their work directly from the business. The business owner often pays the contractor, and the contractor provides compensation to the subcontractors they hire. However, if you don’t pay your contractor, their subcontracts don’t get paid either. Anyone you owe money to could come after you for past-due invoices and even pursue legal action in court.
Types of Bankruptcy to Resolve Subcontractor Debt
Filing for bankruptcy could help your business when you’re in debt to a subcontractor.
As a business owner, you have several primary bankruptcy options available to you.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy isn’t the most common option for businesses that want to keep their doors open. However, it’s beneficial if you plan to terminate operations and shut down your company. That’s because filing Chapter 7 requires liquidating your assets to pay off debt.
Many business owners can’t afford to continue running their businesses without their assets. You might depend on specific assets to provide products or services to your customers. If you sell the assets, you can no longer operate your company as needed. Preparing to file for Chapter 7 means you have come to terms with closing the doors to your business to resolve your subcontractor debt.
Filing for Chapter 7 bankruptcy is an excellent option for resolving your debt because it triggers an automatic stay. That means it stops most collections actions against your business. Creditors can no longer contact you about your debt or file lawsuits to recover the money you owe.
Chapter 11 Bankruptcy
Filing for Chapter 11 bankruptcy is essentially a reorganization of a company’s debt. When you can’t afford to pay your subcontractor, you can file for Chapter 11 and create a repayment plan. You will have time to pay back the total amount by making monthly or quarterly payments, often of a reduced balance, instead of paying everything you owe up front.
Much like Chapter 7, Chapter 11 bankruptcy prevents creditors from taking collection action against you. They won’t be able to file a lawsuit if you have not paid them for their work.
The bankruptcy judge must approve the terms of the repayment plan. As long as you meet the terms of the repayment plan, the court will discharge your remaining debts, and you can proceed with running your business.
Chapter 13 Bankruptcy
Businesses that operate as sole proprietorships that don’t qualify for Chapter 7 bankruptcy or don’t want to cease operations might benefit from Chapter 13 bankruptcy. This is another form of reorganization, similar to filing for Chapter 11. However, not all debt is eligible for this type of bankruptcy, and it only allows debt up to a specific amount.
When you file for Chapter 13, you can create a repayment plan with your creditors. These plans typically last between three to five years, depending on your monthly income compared to the state median. You must make the agreed-upon monthly payments until you pay back the money you owe to the subcontractor.
Chapter 13 bankruptcy issues an automatic stay. Creditors can’t file lawsuits or pursue other forms of collection actions against you once you file. However, you must find a way to pay them back with an approved repayment plan. You can also stay in business and avoid liquidating your assets to pay off your debt. This puts business owners in a position to continue operations while securing their financial future.
Contact Us
Bradford Law Offices has represented Raleigh business owners for over 25 years. We understand how stressful it can be to find yourself in debt. When you can’t afford to pay a subcontractor for their work, you could face legal action from the subcontractor or a collections agency. You deserve the opportunity to pay off the money you owe and proceed with your business from a more secure financial position.
If you face a lawsuit from a subcontractor or can’t pay for the services they provided for your business, contact Bradford Law Offices immediately. We can meet you for a confidential consultation to determine the bankruptcy options that are available to you. Call us right now at (919) 758-8879 or reach out to us online.