Tips for Tough Times #3

One of my repeated themes is to seek legal counsel early. This is a variation on the theme of seeking counsel when trouble first rears it head so that you can plan for the worst case eventuality. This post is geared towards those entrepreneurial spirits out there who are forging ahead with starting their own businesses. It takes an extra measure of courage to do this in this post-recession recovery period (I am not entirely convinced that we are post-recession, but let’s go with it). And, along with that extra measure of courage I recommend an extra measure of counsel.

For by wise guidance you will wage war, And in abundance of counselors there is victory. Proverbs 24:6 (NASB)

And, while starting a business is not as bloody as waging war, it is indeed a financial battle. So, I recommend getting counsel from a lawyer all the way from setting up the proper corporate entity to tips on financing that can save you down the road. While talking to a lawyer about your business idea may not be the most inspiring and motivating conversation, it can be a lifesaver for you finances. This is because lawyers are trained to think about and plan for worst case scenarios – those eventualities you do not want to contemplate. The conversation, then, may feel like it is taking wind from your sails. However, making sure the right documents are in place from the inception of your business all the way to how to sign on promissory notes can make a huge difference when times are tough.

Aaarrrggghhh – Paperwork!

If you have started the process of filing bankruptcy, your attorney has likely asked you to produce a large quantity of documents. This can be a daunting task for many because, truth now, many of us are horrible about record keeping. However, if you are in need of a fresh start financially, then you want your bankruptcy to go smoothly. And, you could actually be prevented from receiving a discharge of debt in your Chapter 7 if you failed to keep good records:

11 USC Sect. 727(a)(3) states that a debtor will get a discharge unless “the debtor has concealed, destroyed, mutilated, falsified, or failed to keep or preserve any recorded information, including books, documents, records, and papers, from which the debtor’s financial condition or business transactions might be ascertained, unless such act or failure to act was justified under all of the circumstances of the case;” (emphasis added)

Basically, if you are in financial trouble and looking at the prospect of bankruptcy, keep track of what you are spending things on. One way to help with this is to hold on to receipts, bank statements, pay stubs and other income documents. Trustee’s rarely get down to the level of looking at receipts for debtors, but every once in a while, expenses get challenged and it would be great to have documents handy to answer the challenge.