Out of Business?

“Out of business” can mean a number of things, each of which has a different legal definition and a different effect on your ability to collect. For example, if the company has filed bankruptcy, then any attempt to collect on your part is governed by an “automatic stay” under Federal bankruptcy law and cannot proceed except in bankruptcy court.

However,”out of business” can also mean,  the lights were turned off, everyone was told “sorry but you aren’t getting paid” and everything was packed in a U-Haul and trucked north on interstate 5 to destinations unknown- in which case, you may have recourse, since the business might just continue somewhere else, perhaps under a different name, in order to avoid it’s debts. In fact, the business owner may have the new corporation ready to go, and plan the whole scenario out, where he racks up a lot of debt and unpaid wages, then stiffs everyone and starts the same business over again elsewhere. It happens all the time. This is why it is absolutely crucial that you know exactly the legal conditions under which the judgment debtor is “out of business” and you do as much diligence as possible on issues of other corporations and other business names and locations, before you sue and get your judgment, which has only the name of the one “out of business” entity on it. With some research, you may have had the owners on there personally, or some other corporations of the owners you never knew about.

Get Help

If your debt is considerable, collecting against a business, especially when there is a risk the owners will attempt “shenanigans” to avoid the debt,   is very often a situation that demands the assistance of someone with experience. A knowledgeable collection attorney, for example, can be invaluable in figuring out what is going on and obtaining information about the business from various sources like tax authorities, county and state records offices and licensing agencies.

Very often, almost all of this information can be obtained before the case is adjudicated, which saves a ton of trouble- a bit of research up front can often be the difference between your debt getting paid in full, and you coming up totally empty-handed!