Our Team Can Help Local Construction Businesses and Vendors Navigate This Difficult Economic Time
Denver-area contractors, subcontractors, and vendors have been facing financial difficulties. Inflation in the cost of materials has made bidding on jobs as difficult as ever. In 2021 and 2022, many contractors found the cost of materials to be 10% or more than when they bid the job. This dynamic created losses for many jobs, forcing contractors to use money for a new job to pay for the costs of an old job. While robbing Peter to pay Paul is never good, it is now more difficult than ever with less work for contractors because of the economy.
With fewer opportunities for new builds, renovations, and repairs, many contractors are reaching the end of their financial rope. These contractors simply do not have enough funds coming in to pay the vendors and subcontractors for the jobs that lost money in 2021 and 2022. And if the contractor has used new customer deposits to pay for the past jobs, they have unhappy customers who have paid for something that cannot be delivered. The longer this goes on, the more unpaid vendors and subcontractors and unhappy customers will exercise their rights to collect. This can include vendors and subcontractors filing liens on the customer’s property, which makes for more unhappy customers. Ultimately, this downward spiral ends in a string of lawsuits against the contractor.
While this situation is extremely difficult, Wink & Wink’s team is focusing our energy to assist and protect contractors with solutions, including Chapter 7 bankruptcy and Chapter 13 bankruptcy, that can help contractors find a successful financial path in spite of current economic struggles.
Fortunately, there are solutions to help you discharge your debt and look toward a better financial future. Wink & Wink, the leading team of debt settlement attorneys near you, can help reposition you and your business through Chapter 7 bankruptcy or Chapter 13 bankruptcy.
A Solution for Sole Proprietorships, Including Contractors, from Our Denver Debt Relief Lawyers
If you are a sole proprietorship, your business debt is also your personal debt, which we understand can be a frightening prospect because the responsibility falls on you alone.
However, there is a significant upside to debt relief when organizing your business as a sole proprietorship, as opposed to a corporation or LLC: you can file for personal bankruptcy and continue to operate your business. In fact, you can restructure your business and keep up to $60,000 in business-related equipment based on a “tools of the trade” law. Also, receivables owed to you for completed work is 80% protected.
If your business is organized as a corporation or LLC, things are a bit more complicated because you are legally separate from your corporation or LLC. If you file personal bankruptcy, your liability for business debt may be discharged, but the LLC or corporation will still owe the debt. And if the LLC or corporation files bankruptcy, it may get out of the business out of debt, but you may be personally liable for some of the business debt.
While the starting point is that you are not personally liable for the corporation or LLC’s debt, you can be personally liable for the business debt in a few different circumstances. First, you may have personally guaranteed the debt. Many vendors and nearly all banks who will extend you credit to your LLC or corporation will require a personal guarantee from the business owner. Second, creditors for certain types of debt can hold the business owner personally liable for this debt. This includes certain kinds of taxes, like sales and payroll taxes.
If you are personally liable for your LLC or corporation’s debt, a good strategy can be to dissolve the LLC or corporation, begin operations as a sole proprietor, and then file personal bankruptcy. This strategy can shut the door on the LLC or corporation’s debt because it no longer exists. And when done properly, the owner continues operating the business (same business, different structure).
With this bankruptcy strategy, your prior debt can be discharged while providing you with the means to move your business forward in the future. Get in touch with Wink & Wink, the preferred team of debt settlement attorneys near you, for a free consultation to review your situation and receive a customized legal strategy.
Chapter 7 bankruptcy or Chapter 13 bankruptcy doesn’t have to mean the end of your business or your personal financial health. In fact, many people who file for bankruptcy are able to rebuild their credit to a score of 700 or more within two to three years of filing.
Risks to Contractors with Debt: Colorado’s Construction Trust and Conversion Claims from Customers
There can be limitations to bankruptcy for contractors. In particular, vendors, subcontractors, and customers may have claims to hold the business owner liable, which can survive bankruptcy discharge.
Colorado’s Construction Trust law essentially says that a contractor is not allowed to make any money on a job until all vendors and subcontractors for that job have been paid. If the job lost money and the contractor did not pay the owner anything, then the trust was not violated. But if the contractor paid himself from the job, that money is viewed as a violation of the trust. In that case, unpaid vendors and subcontractors can seek to hold the business owner personally liable and, if the owner files bankruptcy, claim that their debt should not be discharged in bankruptcy.
Similarly, customers may have a claim against a contractor for conversion if the contractor took money for a job and did not do the work. Conversion is essentially a claim of theft and can enable the customer to hold the owner of the business personally liable in a way that can also survive a bankruptcy discharge for the business owner.
Subcontractors and vendors must file a separate complaint in the business owner’s bankruptcy to allege a violation of the Construction Trust or conversion. If they do not file such a complaint by the deadline approximately three months after the bankruptcy is filed, then the debt will be discharged in the owner’s bankruptcy.
Fortunately, most of these types of creditors do not file such a complaint. However, every contractor considering bankruptcy should seek experienced counsel to assess their risk and plan accordingly. Wink & Wink has represented numerous contractors in bankruptcy and has experience dealing with creditor’s claims for conversion and violations of Colorado’s Construction Trust law.
Wink & Wink’s Debt Relief Lawyers in Denver Can Also Help You Avoid Debt-Related Lawsuits
While there is more risk for contractors than many other debtors in bankruptcy because of Colorado’s Construction Trust law and conversion claims from customers, bankruptcy provides some immediate benefits to the business owner. Filing for Chapter 7 bankruptcy and Chapter 13 bankruptcy with a premier debt settlement attorney near you can place an automatic stay on any legal proceedings that your creditors are pursuing.
An automatic stay is beneficial for a number of reasons:
- Creditors can’t contact you or try to collect on your debts.
- Your assets can’t be repossessed.
- Your wages can’t be garnished.
- Your utilities can remain on for at least 20 days.
- Foreclosures or evictions (unrelated to another judgment) are halted.
Keep in mind, however, that there are exceptions to the automatic stay including child support, alimony, and other financial obligations. Claims from subcontractors, vendors, and customers are generally subject to the automatic stay, even if there are violations of the Construction Trust or conversion. Overall, however, this stay provides relief while you work with the leading team of Denver bankruptcy attorneys to develop a strategy to discharge your debt.
What to Do If You Are Being Sued: Our Denver Debt Relief Lawyers Share Their Strategies
Creditors sue to get a judgment that allows them to garnish your wages or bank account funds. They can also put a judgment lien on your home to take possession of your property.
If a creditor sues, it is important to tap into Colorado’s exemptions, which allow you to protect up to $2,500 of your funds. You can claim this exemption within 14 days of being sued. You can also protect up to $250,000 of home equity (or, if you’re 60 years of age or older, or you are disabled, you can protect up to $350,000). If you file for Chapter 7 bankruptcy or Chapter 13 bankruptcy, this exemption can remove the lien on your property; however, regardless of whether you decide to file for bankruptcy, it is important to claim these exemptions if you are being sued.
While these judgments are rare, they can still happen, and it is best to stay ahead of them by claiming exemptions or filing for bankruptcy to get an automatic stay against your creditors. Wink & Wink’s attorneys for debt settlement near you can guide you through this process, so that you don’t miss any opportunity that will benefit you now and in the long run.
Debt Settlement May Be Your Solution, And Our Denver Debt Relief Lawyers Explain the Benefits
Debt settlement is another possible debt relief solution to help clear up certain debts. Instead of filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy, Wink & Wink can help you with a debt settlement strategy that will benefit you, depending on your specific circumstances. This can help contractors who face claims for violations of the Construction Trust or conversion.
Debt settlement is a strategy in which you stop paying on your debt for three or four months. Then, you offer a discounted settlement to your creditors, who haven’t received any recent payments. Creditors may decide to accept this settlement because your nonpayment is a risk for them. Our team has found that many creditors will accept about 50 percent of the total amount of debt you owe them.
While this solution won’t apply to all the types of potential debt that your contracting business is struggling with, this solution is worth exploring with an outstanding team of debt settlement attorneys near you: Wink & Wink.
Partner with Our Team of Denver Debt Relief Lawyers – We Are Committed to Denver Contractors, Subcontractors, and Vendors
There’s nothing more important to us than seeing Denver businesses and community members find a path through your financial difficulties, so that they can thrive and continue to add value to our city through their talents and expertise.
Wink & Wink’s bankruptcy and debt settlement attorneys near you can provide strategy-driven Chapter 7 bankruptcy, Chapter 13 bankruptcy options, and several other debt relief solutions, so you can start fresh and see hope in your business and personal future.
Call us for a free consultation today at (303) 410-1720, or send us a message online. We look forward to helping contractors, subcontractors, and vendors find a way to thrive during these trying times.