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By their nature, entrepreneurs are a different breed. Whether they have a better idea for a product, or a service, or even an idea for a new product or new service that’s never been tried before, entrepreneurs are driven by their ideas, their passion, their commitment and perseverance to succeed.


The rewards for success can be great, but the risk is also great. Some of the most successful entrepreneurs failed on their first attempt to build a profitable business. And often, they failed multiple times before hitting one out of the park.


Financial distress is on the risk side of that risk/reward analysis. Some of the most successful entrepreneurs on Earth have faced those dark moments of financial distress. In just one example, Nicholas Woodman founded a startup gaming and marketing company called Funbug, which, after burning through $3.9 million in startup funding, went bust. Nothing “Fun” about that. Woodman was devastated by the failure of his company, and took time off from the hustle to go surfing in Indonesia. And it was while surfing that he first came up with the idea for his next company, GoPro.


Although failure, followed by great success, is a common story in successful entrepreneurship, it is often overwhelming when you’re trying to navigate your path out of financial distress. When a business is in financial distress—often through no fault of its own—bankruptcy can provide a way forward. Debtors typically view bankruptcy as a failure, to be avoided at all costs. And creditors may dread the specter of bankrupt debtors even more so.


In reality, however, bankruptcy is a powerful tool for minimizing the damage when a debtor is unable to pay their debts. This was the intent of the founders of this nation, who sought to establish an approach to insolvency that would encourage a blossoming of national commerce and economic growth, and reduce the drag of insolvency on that economic growth, while still respecting the rights of the insolvent debtor’s creditors.


The result today is a framework of laws that encourages entrepreneurial risk-takers, commercial enterprise, and robust economic activity, while discouraging the kinds of reckless and lawless behavior that lead to financial ruin, economic collapse, and defrauded investors.

The Two Main Types of Business Bankruptcy

  • Reorganization: Chapter 11 provides businesses in financial distress an opportunity for a fresh start and the ability to continue their operations. A Chapter 11 reorganization allows a company to restructure capital and reorganize the business’s affairs, assets, and liabilities by eliminating unaffordable debts and contracts, developing a payment plan for their creditors, and keeping the doors open to generate income to pay creditors and give the business debtor time to become a solvent enterprise again. Some of America’s largest companies, including General Motors, Sears, American Airlines, and 24 Hour Fitness, have filed for reorganization under Chapter 11.

  • Liquidation: Chapter 7 liquidation, which provides insolvent businesses and their creditors with an organized liquidation of the company’s assets and payment of its creditors. After the assets of the company have been liquidated and the proceeds distributed to the creditors, the remaining debt is discharged in bankruptcy.

Out-of-Court Workouts

Another approach to insolvency that may be available to a business debtor is the out-of-court workout. In an out-of-court workout, the debtor reaches an agreement with its creditor without filing for bankruptcy protection. This approach is an attractive option for debtors with the means to pay the debt under an agreed-upon plan, because the plan is a private agreement, and thus, keeps the debtor out of bankruptcy court. It can also be an attractive option for the creditor, because the creditor ends up with an enforceable plan that doesn’t subject the creditor to the limitations the creditor would face in bankruptcy court. If the debtor has the means to commit to an out of court workout, this approach may be a win-win for both debtor and creditor.

Don't Wait - Take Action Now

Entrepreneurs are driven to succeed. But when your business is in financial distress, you need to understand what your options are, and take appropriate action before things get worse.


Likewise, if you are a creditor-business faced with an insolvent debtor, you need to take action to preserve your rights in bankruptcy.


Whether you are operating a business that is in financial distress, or are owed money by a business that is in financial distress, delay will only make things worse. A consultation with Nichani Law Firm is your first step in understanding what your options are. From that starting point, we can help you develop a plan of action that best fits your circumstances and objectives. Nichani Law Firm represents companies, debtors, creditors and stakeholders in bankruptcy and financial disputes. Our team has highly experienced bankruptcy practitioners who provide workable solutions for creditors and debtors based on liquidation, restructuring, reorganization, and out-of-court workouts.

  • Business Chapter 11 Reorganization

  • Business Chapter 7 Liquidation

  • Subchapter V-Small Business Debtor Reorganization

  • Debtor and Creditor rights

  • Consumer Chapter 13 Bankruptcy

  • Consumer Chapter 7 Liquidation
  • Out-of-court workouts and Debt Restructuring

  • Relief From the Automatic Stay

Include Legal Representation For Creditors and Debtors in:



Nichani Law Firm is a boutique Silicon Valley business and commercial litigation law firm, providing legal representation with a commitment to exceptional service, high-caliber solutions, and a deep focus on Business and Commercial Litigation, and Bankruptcy and Creditor Rights. In every dispute, whether large or small, simple or complex, we will provide representation custom-tailored to meet your objectives. As your representative, we will zealously advocate your position, whether in an Alternative Dispute Resolution process, or at trial. Nichani Law Firm has successfully represented a variety of businesses throughout Silicon Valley and the Greater San Francisco Bay Area. We also serve as local counsel in Silicon Valley and the Greater San Francisco Bay Area for out-of-state attorneys and out-of-area companies, whether based in another region of California, another state, or another country—with business interests in Silicon Valley and the Greater San Francisco Bay Area.

For a consultation, contact Nichani Law Firm.


Nichani Law Firm practices bankruptcy law and is considered a debt relief agency by federal law. We help businesses file for bankruptcy relief under the United States Bankruptcy Code.

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