Economy Causes Small Businesses To File Bankruptcy

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NASHVILLE, Tenn. - Small businesses are supposed to be the economy's backbone, but the recession is breaking and in many cases bankrupting them. Many local bankruptcy attorneys are busier than they have ever been.

Bankruptcy attorney Roy DeSha said the rush of clients started coming in about two years ago which was why he had a feeling something serious was about to happen with the economy.

The emotions shared in DeSha's office make even the toughest attorney sympathetic.

"When you see it on peoples face when they come in here it's a tough thing," said DeSha. "I've been doing it for nearly 30 years. This is the first time that I've ever had to turn away business."

DeSha said once rock solid small businesses are falling victim to the recession.

"This time they haven't been able to weather it and they're coming to me and they're saying ‘we thought we could hold out but we don't see the end yet,'" said DeSha.

DeSha said previously it was the young business or the business with a flawed business plan that was coming to him.

Now it was the businesses that have been around for 20 or 30 years that are trying to save themselves by going into bankruptcy.

Michael King's Monell's restaurant chain fell victim to Chapter 11 bankruptcy.

"It was a double whammy and it was a pretty emotional roller coaster," said King.

The bankruptcy happened after they paid their creditor, Lehman Brothers, $76,000. When Lehman Brothers went under, Monell's money was gone.

"It's overwhelming the paperwork - overwhelming. I'm talking about a stack that thick and you get nervous because you think oh my god you're going to lose everything and everything you've worked for," said King.

For King Chapter 11 allowed him to keep Monell's open and reorganize the financial situation.

Attorneys said many companies make the mistake of filing for bankruptcy too late. In such cases it can be difficult to save the business.