Distressed Businesses Should Still Pay Their Lawyers - Above the Law

"Businesses facing financial problems or other types of challenges usually need to hire lawyers. For instance, companies being sued by disgruntled investors for mismanagement may need to secure counsel, and businesses headed for restructuring might need lawyers to handle the complicated bankruptcy process. Such companies may want to cut costs to focus on vital business operations, and this might mean stiffing the lawyers they hired. However, this tactic can be shortsighted and cost businesses dearly in the long term."

"One reason why distressed businesses should not skimp out on paying their lawyers is that attorneys can minimize the amounts owed by such companies or delay payment of sums. For instance, if a lawyer represents a company that owes money to a creditor, the lawyer can be essential in raising defenses, delaying payment of sums owed, and negotiating a payment plan that might make it easier for the company to pay off the debt."

"Another reason why it is usually best for distressed businesses to pay their counsel is since such lawyers might be essential to the continued operation of a business. For instance, distressed companies might seek restructuring to help them survive a financial crisis. This usually requires that bankruptcy lawyers and other types of attorneys complete the appropriate filings and take other legal action to ensure that the restructuring process is successful."

Distressed businesses often require legal counsel to address creditor claims, litigation, and restructuring needs. Attorneys can raise defenses, delay payment obligations, and negotiate payment plans that reduce immediate financial strain. Counsel plays a central role in completing bankruptcy filings and other legal actions necessary for successful restructurings. Without counsel, creditors can obtain default judgments and take actions that exacerbate financial harm. Short-term attempts to avoid or delay paying lawyers can result in liens, denied legal services, impaired defenses, and ultimately larger losses for shareholders and the business as a whole.

Read at Above the Law