Can You Just Walk Away from a Debt-Riddled Business and Start Fresh?

In the wake of the coronavirus shutdown, many business owners are under immense financial stress caused by the economic impact of a nearly worldwide standstill. Some may be in or at risk of breach or default. Creditors may be jockeying for payment and applying pressure through demands and threats of legal action.

Meanwhile, for many professionals, such as doctors, dentists, technical specialists and professional advisers, the value of their business is often tied much more to their personal services and goodwill than to hard physical assets. For these owners, walking away from the business may mean walking away from leased or heavily leveraged equipment with a chance to take their licensed skills and talents into a new business.

I am often asked by indebted business owners whether they can simply close an existing heavily indebted practice and open a new one. The answer, in some cases, is yes -- but it should only be considered by the right people (those whose debts won't follow them) and be done in the right way.

Do NOT Do This

An example of what not to do is found in an old Florida case, The defendant's medical practice was sued for breach of contract and lost. Twelve days after a substantial money judgment was awarded,