Does Filing for Bankruptcy Really Mean It Is the End of Your

Does Filing for Bankruptcy Really Mean It Is the End of Your Business Dream?

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Bankruptcy surfaces fear in any business persons’ eyes. But is it always the option at hand? How can you save your business, your legacy, in the most efficient, law-abiding manner? Selwyn Whitehead, an expert in bankruptcy law, reveals the best way to address such issues.


What would you say are the main risks of filing for bankruptcy too late?

Filing a bankruptcy too late (and sometimes filing too early or too often without competent business and legal counsel) limits the debtor’s chances for economic recovery. By filing a bankruptcy too late, the debtor limits her options of finding a solution to her financial situation outside bankruptcy, such as by negotiating a voluntary restructuring agreement with creditor(s) before or shortly after an initial default becomes a potential reality. If done properly or at least realistically, and before an adverse action has occurred, the debtor will gain more time to look at all her options, including filing for bankruptcy at the optimal time. Also, the additional time will give her bankruptcy counsel and financial analysts the time they need discover more facts about why the business is in financial distress and how these symptoms can be addressed prospectively.


What are the myths that need to be dispelled surrounding bankruptcy?

The primary myth: small business owners filing for bankruptcy is a sign of a moral failing and should be undertaken only as a last resort after all other avenues have been exhausted.

However, according to the US Small Business Administration, nearly 70% of small businesses in the United States will fail before their 10th anniversary:

  • About 80% of businesses with employees will survive their first year in business. (The most recent data shows that of the small businesses that opened in March 2015, 79.9% made it to March of 2016.)
  • About 50% of businesses with employees will survive their fifth year in business. (Data shows that of the small businesses that opened in March 2011, 51% made it to March of 2016.)
  • About 30% of businesses will survive their 10th year in business. (The most recent data shows that of the small businesses that opened in March 2006, 32.8% made it to March of 2016.)

As such, I say to not at least consider bankruptcy as a possible solution to help save a business in financial distress; in order to save the income it creates for its owners, employees and communities would be the true moral failing. And as stated above, waiting and filing too late will likely limit the remedial effects of filing.


What is the best and worst part of bankruptcy law?

The thing I love most about practicing bankruptcy law is that it intersects with all the other areas of the law, both state and federal statutory and case law. And as it is constantly evolving and changing on an almost daily basis; I must constantly study bankruptcy law so that I can keep abreast of what’s new in order to better serve my clients and my community.

The thing I like least about my practice area is the lack of diversity, racially and regarding gender. Even though I live and practice bankruptcy law in one of the most progressive states in the Union: California, I do not see enough female and ethnic bankruptcy attorneys or trustees and although I am admitted in multiple federal districts in the state, to my knowledge, I have never appeared before a single ethnic bankruptcy judge. Because of the unique perspective lawyers of colour bring to any practice area, especially in areas dealing with finance and business development in communities of colour, I firmly believe there is a severely unmet need for female bankruptcy judges of colour. Due to this, I unfortunately sometimes see a  limited view and misunderstanding of the practical financial needs and ways to address the needs of distressed business and families seeking the protection of the bankruptcy court who come from communities of colour.


Who are the types of clients you mostly deal with in bankruptcy matters?

I love to assist small businesses owners, including pass through entitles such as sole proprietorships, partnerships, LLCs, closely held C corporations, subchapter S corporations and real estate professionals, both agents and brokers. My job is to help these entrepreneurs not only figure out a way to salvage what they can from their stalled enterprises, in order to have some assets with which to start over if they must liquidate the business, but more importantly, I can hopefully help them put in place the business plans, systems and practices they will need to keep their business going and help them make it through the arduous court-controlled and very public reorganisation process and find a way to thrive after putting forth a realistic and confirmable plan of reorganisation and then exiting the bankruptcy as a viable and refreshed enterprise.

I also help consumer debtors who on the one hand, seek the protection of the bankruptcy court in order to put in place plans of reorganisation, that may give them a real chance to save their homes or other major assets facing foreclosure by one or more of their secured creditors. I also help consumers who I assist in coming to the realisation that they need to liquidate their debt in exchange for the surrender of their non-exempt assets as soon as practicable, so they can obtain a fresh start and get on with their lives.

As I also practice estates and trusts law, I assist individuals who may find themselves in the untenable position of being both a successor trustee and/or beneficiary of a loved one’s trust and also a debtor in a bankruptcy case. This unfortunate situation may come into being either as the result of extremely poor planning on the part of the trust’s settlor(s) or sometimes as the result of confusion as to the law (or just plain old greed coupled with the bad advice to file a bankruptcy) on the part of the debtor. What I mean by extremely poor planning by the trust’s settlor(s), is where the settlor(s) believe that a spendthrift provision in the trust document alone will save the vast majority of settlor’s legacy from a court-appointed bankruptcy trustee, if the spendthrift decides to file for bankruptcy; after all, most spendthrift trusts say the magic words that purportedly limit a bankrupt trustee’s access to the corpus of the trust or at least the vast majority of the corpus of the trust.

Finally, as I also practice tax law, I assist debtors who may also have federal, state or local income tax issues and/or property tax issues with one or more of the taxing authorities.


What are the main challenges these clients bring?

Many, if not most, of these small business clients display a real lack of basic business acumen, including having poor or non-existent records keeping systems and practices, or sometimes not even knowing why there is a need for these business tools. These basic tools, along with access to capital and credit, are the life’s blood of each and every small business. Without these tools, the business will enviably lose track of its capital and its contracted debt repayment timelines, and as a result, the business will lack the ability to properly monitor and manage its cash flows. This lack of proper cash flow monitoring and management will likely result a mismatch in timing between a payment due date and the accumulation of sufficient cash to timely make the required payment, which will result in a demand for payment from one or more creditors that cannot be met. This will cause one or more defaults that lead to the need for bankruptcy court protection, or worse.  These clients also sometimes have a very unrealistic view of their products and/or services, where their businesses fit into the marketplace and how their businesses meet a marketplace need, if at all.


How do you navigate these issues?

I help my clients deal with these challenges by first insisting that we take a very hard and realistic look at their business, its products and services, its niche in the marketplace, who its customers are now and who they will be, and where its customers will come from in the future. This information is necessary to formulate even the most rudimentary business plan, which must be constantly updated and explained to the bankruptcy court and the other parties-in-interest in the debtor’s case, such as its secured creditors and the Office of the United States Trustee.  This constant scanning of the debtor’s marketplace and the concomitant updating the debtor’s business plan and plan of action while under the protection of the bankruptcy court is required. Marketplaces are constantly changing in today’s age of AI the IoTs and customer bases are made up more and more of consumers who are no longer employees of companies with relatively stable disposable income, but instead are often employed as contractors without steady reliable incomes of any kind. As such, it is only by developing a realistic, yet flexible, business plan along with the appropriate reporting mechanisms, can a debtor even expect to make it through the bankruptcy gauntlet and come out the other side as a viable business enterprise.


How do you help your clients differently compared with other firms?

I use my weekly radio show, Selwyn’s Law to help educate my listening audience about bankruptcy and the other pressing issues confronting the financial services industry and its consumers. I also give presentations to church and community groups on business development and personal finance and tax issues.




4650 Scotia Avenue, Oakland, California 94605

Phone: 510.632.7444

Fax: 510.856.5180


Web Site:


Selwyn D. Whitehead Esq. [JD, LLM Tax Law, LLM IP Law, California Bar Bankruptcy Law Certified Specialist] is a San Francisco Bay Area bankruptcy and tax attorney whose practice focuses on helping her clients manage their wealth through effective estate and tax planning and/or manage their debt through debt restructuring or bankruptcy. Selwyn also helps her clients facing foreclosure and represents clients with emotionally and financially “taxing” issues before the Franchise Tax Board, the IRS and the U.S. Tax Court.

Prior to going into private practice, Selwyn managed a group of attorneys and paraprofessionals in Fireman’s Fund Insurance Company’s Claims Department, where she was responsible for auditing the claims and case handling practices, performance, fees, and expenses of outside defence counsel.

1 Comment
  1. Michael says

    Haha wow, I love this. PLEASE keep posting! Can’t wait to read your next blog!

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