Bankruptcy Indiana

The old saying "One thing leads to another" is certainly true when it comes to small business bankruptcy in Indiana. I've provided bankruptcy services in Indiana over the past twenty five years, and also served as a debt consolidation lawyer. One common thread in small business bankruptcy appears to be that the financial troubles of big businesses ends up affecting the small ones that serve as their suppliers, vendors, and distributors.

That's exactly what appears to have happened with Indianapolis-based Freight Masters Systems, a logistics and trucking firm that filed Chapter 11 bankruptcy two weeks ago. Freight Masters' troubles appear to have begun when they lost a lot of business from Boeing Corporation when that company began to be squeezed by the recession. Then came Chrysler's bankruptcy, and Freight Masters had been doing a lot of work for Chrysler.

Many small businesses use their receivables as collateral to borrow money for operations and expansion.  Because Chrysler was in such an unstable financial position, banks refused to lend money against Freight Masters' receivables from Chrysler.  That severely cut down on the cash available for Freight Masters to keep going. The company is hardly alone in its financial struggles; nearly 400 trucking firms filed bankruptcy in just the second quarter of 2009! Many personal bankruptcy cases in Indiana, needless to say, were related to those small business bankruptcy.

By way of background, Chapter 11 is typically used to reorganize a business.  The company functions in many ways as a trustee, with a duty to protect the rights of creditors and to file monthly operating reports to show the court how the reorganization is progressing.  The fact that the owner chose Chapter 11 means he intends to try to keep the company alive.

As an Indiana small business bankruptcy attorney, I believe there are a couple of "lessons" to be gleaned from reading about the Freight Master bankruptcy:

1. It's largely a myth that bankruptcy, either small business bankruptcy or personal bankruptcy, comes as a result of reckless spending or poor business decisions.  In fact, many years of dealing with bankruptcy in Indiana have taught me that both individuals and small businesses are often brought down by forces beyond their control.  Even when a small business is well-managed, sometimes outside forces, including problems of big businesses, create bad timing and lead to small business bankruptcy. And, even when an individual has successfully managed his or her financial affairs in the past, a combination of factors can derail the best financial plan.

2. Today, small businesses, and particularly those related to automotive and trucking, are being caught in a "perfect storm".  They have difficulty obtaining credit at the same time as customer orders are being reduced and customers are slow to make their payments.

I'd like to add best wishes from Mark Zuckerberg,  as well as from the Columbus bankruptcy lawyers who work in my offices there, to those expressed in an Indianapolis Business Journal editorial:

"One of the city’s minority-owned businesses has fallen on hard times, and we wish its founder and CEO, Gene McFadden, the best in pulling back onto open roads."