Behind The Curtain—Chapter 11 From The Inside—Chapter 2—The Initial Meeting

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Meet Brett, Jr. from Brettco, Inc. (while Brett and Brettco are not real, they are based on real clients). Brettco is an industrial painting company, started by his father almost 50 years ago. Brett started working at Brettco right out of college and has been the president of Brettco for the last 20 years. When Brett took over the business it was doing about $1,500,000 a year in revenue. Through hard work, Brett steadily increased the size of the business. One year the company did about $3,000,000 in business. Brett was able to weather the recession in 2008 by working with his accountant to cut expenses. Brett made sure that all of the taxes were paid and he was able to strike a deal with the bank, restructuring the loans. During this time, Brettco was sued a few times and hired a lawyer who was a family friend to defend the company.

Brettco’s customers were local, within about 50 miles of the business. In 2018, Brett wanted to expand the business and started to bid on jobs hundreds of miles away. Brett won a number of those bids and expanded the business. However, now that the business covered a larger geographical area Brett found out that it was more difficult to maintain the same level of control.

A number of the jobs outside of the home area did not go well. There were a lot of delays. Even though most were not Brettco’s fault, it didn’t matter. Revenue dropped and expenses went up. The bottom line was getting squeezed. Brett called the bank but, this time the response was not as positive. He still managed to pay the bank every month.

Brett knew he had to do something. He met with his accountant, who suggested he look into bankruptcy. Brett hated the idea. He thought that bankruptcy meant shutting down the company. He considered this a slap in the face to his father, who started the company and was able to deal with any issues that came up. 

Brett’s accountant reminded him that his father always looked at every option and, if he needed to, would have looked into bankruptcy.

Brett agreed to take the plunge. He met with Jeff, an experienced bankruptcy attorney, went through the chapter 11 process, and, until the pandemic, the business was having its best year. 

Brett has been gracious enough to answer some questions to help others understand both the thought process he went through in making the decision to meet with a bankruptcy attorney and what it was like going through chapter 11.  

When did you know you needed to do something? When we realized that monies coming in did not cover the payroll and payables for certain jobs. Also, even though we were current with the bank loan since revenues were down, we were concerned that we might miss a payment. 

What steps did you take before you seriously considered bankruptcy? The only step I took was to panic. Basically, by the time I realized the situation, we were already in big trouble. Being the sole owner it took me a little while to realize the predicament I got into.

Did you speak with your bank, taxing authorities, etc. to try and strike a deal first? No. As I said, we were current with the bank. We also made sure that we were current with our taxes, particularly trust fund taxes.

What concerns did you have about filing for bankruptcy?  Losing my house, my cars, and mostly my employees would suffer a loss of jobs.

How did you go about selecting your attorney? I interviewed two attorneys. My accountant gave me two names. Before I met with either one, I did some due diligence. Since I didn’t know either of them and I didn’t have any friends who knew them, I looked at their LinkedIn page and their law firm website. Recognizing that bankruptcy is a specialty, I wanted to make sure the attorney had a lot of experience. One attorney was a partner in a large firm and the other was in a smaller office. I met with both of them. They both had a lot of experience and clearly knew what they were talking about.  The one I picked was the smaller firm. There were a number of reasons for this. First, since my company is relatively small, I was concerned that I would not get the attention of the partner and most of the work would be done by younger, less experienced, attorneys. Also, the hourly rates at the larger firm were significantly higher than with the smaller firm. Finally, the attorney with at the smaller firm was more personable, it sounded like he knew what he was talking about and he was very straightforward regarding what to expect.

What factors were important to you? I wanted an attorney that was knowledgeable and spoke to me in English, not lawyereze.

What did you need to do to get ready for the first meeting? I was asked to bring in basic financial documents, such as my most recent P & L statement and the balance sheet. I was also asked to bring in loan documents, any tax notices that I had received, and any lawsuits that had been filed.

What were your expectations? I am not sure I had any particular expectations, other than I was nervous and wanted to know if I was going to lose my business.     

What did you want your lawyer to do before the case was filed (negotiate an out of court workout, etc.)? I just wanted to know if and how I was going to get through the process.

What did your lawyer want you to do? I had to get my documents together. While this was a bit of a challenge, it was clearly one of the reasons why I was in the position I was in, so it was nice that I was being “forced” to do what I should have done.

How important was it that your lawyer explain the process. That was very important. I wanted to know what to expect including how many times I would need to be in Court, what it would be like to appear in front of the Judge.

In retrospect, did your lawyer do a good job of explaining the process to you? Yes. He addressed all of the major issues and kept asking if I understood everything and whether I had any other questions.

What did you find most surprising in the pre-filing process? The amount of paperwork that was involved. While a time-consuming process, in the end, it was well worth it.

Is there anything about the process your lawyer did not tell you that you wish you knew? Beyond the paperwork, I am glad I went to the person I hired. He kept me informed and he had what I will call “positive realism.” In other words, he was very positive about the process and the likelihood of success, but he never sugar-coated anything. 

What advice would you give to business owners whose companies are having financial difficulties? Whether the difficulties are as a result of the pandemic, or you were having difficulties anyway, the best thing you can and should do is to meet with an attorney who is experienced in bankruptcy. You will find out about your options and the process involved. Remember, information is power, and meeting with a bankruptcy attorney provides you with that information so you can make an intelligent decision. Also, it is better to meet sooner, rather than later, because you have more options. 



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