Q: Trying to figure out if a lawsuit is forth to try and fight against or file bankruptcy.
My company is being sued by ex-contractor for an alleged debt. The debt is over stock that's been overproduced and delivered late which they initially begged us to keep the goods with no payment and pay when it sells. While we paid part of the total, at some point they decided we can't make $5K or smaller payments and they need the full amount which is unrealistic (the remaining amount is just over $100K)
A:
Thank you for sharing your situation. Based on the information provided, here's an overview of your options and some factors to consider:
1. Evaluating the lawsuit:
- Review the contract terms with the ex-contractor
- Assess the evidence supporting your position (e.g., communications about keeping goods without payment)
- Consider the strength of your defense against the claim
2. Potential defenses:
- Breach of contract by the contractor (late delivery, overproduction)
- Modification of payment terms (if you have evidence of the agreement to pay when goods sell)
- Mitigation of damages (their request to keep goods may have contributed to the situation)
3. Bankruptcy option:
- Chapter 7 (liquidation) or Chapter 11 (reorganization) could be possibilities
- Consider the overall financial health of your business
- Evaluate other debts and assets
4. Negotiation:
- Attempt to negotiate a settlement or payment plan before proceeding to court
- Consider mediation as a less costly alternative to litigation
5. Cost-benefit analysis:
- Compare the cost of fighting the lawsuit vs. the amount owed
- Consider the potential impact on your business reputation and relationships
6. Legal counsel:
- Consult with a business attorney or bankruptcy lawyer to get professional advice tailored to your specific situation
It's important to weigh these options carefully. The best course of action depends on various factors, including the strength of your case, your company's overall financial situation, and your long-term business goals.
Timothy Denison agrees with this answer
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