We do not want to see any company go through the bankruptcy process but there are instances in hard times where bankruptcy is the best option. Often times, bankruptcy is viewed as “your company failed” but the bankruptcy process exists in order to give companies a second chance and potentially right the wrongs of what was done that got them there in the first place.
According to the Journal of Accountancy’s article Red Flags During the Bankruptcy Process, it is best to seek a professional’s advice quickly when signs of potential bankruptcy start to appear. Sometimes a bankruptcy attorney can help work out payment arrangements so that actually filing bankruptcy can be avoided. If a bankruptcy filing is pursued, the attorney can help the company get its financial records in order to facilitate a successful bankruptcy process.
The article gives an example surrounding messy or misleading financial records indicating, “When filing for bankruptcy, misleading income or financial statements can put individuals and organizations of all sizes at risk of being charged with fraud. For example, in the case of an individual filing for bankruptcy, the failure to disclose income from freelance work could be considered fraudulent.”
Another example includes recent transfers of cash or high-value assets. “Sometimes debtors will try to transfer property to friends or family, to protect it,” said Elizabeth Woodward, CPA/CFF, the director of Forensic Accounting and litigation support at Kentucky-based firm Dean Dorton and chair of the AICPA Forensic and Litigation Services (FLS) Committee. “They may not know they are committing fraud.”
