Keeping Litigation From Leading To Bankruptcy

ast month, the popular fireworks display company Bartolotta Fireworks Co. announced that it will close and become part of Wolverine Fireworks Display Company. Bartolotta, which was headquartered in Delafield, put on many of the largest pyrotechnic shows in the Milwaukee area, including the shows at Summerfest, Festa Italiana, Polish Fest, and German Fest. Reports on the company’s bankruptcy proceedings and business dealings suggest that a lawsuit filed against Bartolotta by Wolverine may have been partially to blame for the company’s financial difficulties.

Jeff and Donna Bartolotta, who owned 1/3 of Bartolotta Fireworks Co., filed for Chapter 7 bankruptcy earlier this year. The couple reported about $3.7 million in liabilities and $506,000 in assets. They noted that the Bartolotta Fireworks Co.’s “[p]rincipal secured lender has accelerated the debt and will be starting a collection action soon.” Other court documents reveal that Wolverine won a $154,000 judgement against the Bartolottas and the Bartolotta Fireworks Co. in a Michigan circuit court last year.

Our firm isn’t involved in the Bartolottas bankruptcy, so we don’t know anything about the case other than what has been reported in the news, but we wanted to highlight this case since some litigation obviously preceded the company’s bankruptcy.

There are a lot of bankruptcy filings out there that are sparked by litigation because it is such a costly and disruptive event for a business. One of the things that businesses who are in litigation, and fearing business disruption or financial difficulty should consider doing, is talking with an attorney about negotiating workouts to keep the business afloat.  

A workout is basically a loan modification that adjusts rates or payment schedules or whatever is necessary to keep a business going during a rough patch. Lenders and suppliers are often quite willing to negotiate such a deal because having a deal in place is better than having no deal in place, which might push their own business into trouble.

Owners that suspect litigation will cause financial trouble for their business should talk with an experienced business or bankruptcy attorney. Workouts are something that a traditional business litigator might not be familiar with, so finding a lawyer that knows what they are doing is critical. And it is important to have this talk sooner rather than later because workouts are a tool for preventing bankruptcy, not something that can be negotiated after bankruptcy is filed. Once bankruptcy is filed, any deals that are struck have to be approved by the bankruptcy court.