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PROBLEM 10

Given: there is no one who is not afraid of going bankrupt. But people treat bankruptcy in different ways. Some know how to deal with it in a civilized way, how to manage their assets competently in times of trouble. Others begin panicking, rushing around, blaming everyone else, and feeling sorry for themselves.

As a general rule, the soon-to-be or fresh bankrupt can lose sleep for up to several days. Then depression sets in, sometimes extremely severe and unknown to him who has been so strong and unyielding in any business fight, who used to know no fear in the face of guns and knuckledusters of a gang of robbers or the wrath of corrupt officials and cynical controllers, who has always been ready to go through hell and high water for his business, no matter the weather and time of day.

Question: what happens when he suddenly finds himself facing bankruptcy?

First, an entrepreneur does not want to be called bankrupt; he fears it like the plague, actively fending off the very word ‘bankrupt’ both publicly and privately.

Second, when businessmen start to sense the looming bankruptcy, they begin to spin the centrifuge of problems, seeking advice from everyone and putting in the know even those who are not supposed to be aware of the impending plight.

Solution: do not be confrontational, let alone threatening. Always remember that energy is already being drained, and the next step in business and relationships is total panic. Suppliers stop delivering, banks stop lending, partners refuse to fund joint projects – as a result the cash flow is disrupted, your best employees quit, top managers leave, sometimes even your nearest and dearest shun you.

PROBLEM 11

Given: the maelstrom of problems accelerates as bailiffs arrive and litigation begins. Court orders and restrictions, including temporary arrest of or a ban on property that no longer can be sold or registered, can quickly follow. Foreign travel can be restricted. The centrifugal force of bankruptcy proceedings squeezes out the entrepreneur and deprives him of the right to manage his property and business processes.

Question: what happens next? A group of toxic creditors appear with a financial manager and then a crisis manager. Negotiations out of the question, all they want is to seize and sell all the debtor’s assets. They do not care that in most cases they can get all their money back much faster and in full if they allow the company to be kept afloat. Practice shows that bankruptcy takes at least three years (unless it is the bankruptcy of a guarantor who has no assets – such proceedings are fast-moving and take about 12 months).

Refusing to relinquish ownership and business management rights, not recognizing the substance and legitimacy of the creditors’ claims all while being on the brink of bankruptcy can sometimes turn up the pressure for the entrepreneur by inviting the threat of criminal prosecution for actions that can be qualified as contrived bankruptcy.

Solution: it is crucial to contact experienced lawyers or attorneys as soon as you realize that bankruptcy is imminent. The larger and more complex the business, the more important it is to have a team of lawyers with different skills. One of them can be an excellent negotiator capable of finding common ground with creditors in all disputes; another can be a brilliant theoretician with a keen eye for the attacking party’s Achilles heel and who is also able to competently cover the defending party’s weaknesses. There is no such thing as an all-in-one lawyer.

The businessman must get thoroughly immersed into the subject at hand to avoid being thrown out of the process ‘thanks’ to his own inactivity and stupidity, which will only accelerate the centrifugal forces stripping him of his assets. Apart from the bankruptcy law, this immersion must be into the court practice and, better yet, into the experience of those who have gone through bankruptcy firsthand. But you will have to learn as you go, because time will be extremely short. It is critical not to miss the moment when the ‘invaders’, who are skillful at taking away someone else’s property and at neutralizing the resistance of the current asset owner, cross the border.

If you do not want to trigger the centrifugal force of the imminent bankruptcy and associated procedures, do not shout at every corner about your business troubles. Nor try to call to account those you consider culpable for your predicament, as it will only facilitate the centrifugal process that will throw you out of your asset rights and empty your pockets faster than you can do anything sensible. It’s not just money, it is also lack thereof that loves silence.

The centrifuge of events should be as far away as possible from the source of power that will initiate the bankruptcy process. Do not be the one to plug it in.