Business Bankruptcy: Options For Businesses Experiencing Financial Difficulties
A business bankruptcy generally accounts for most of a company's losses, which resulted from bad debts accumulated over its years of operation. The US Federal Bankruptcy Law governs how certain corporations or any business entities, will go out of business or how these companies can recover from heavy losses.
A business which had filed bankruptcy may use Chapter 7 or Chapter 11 of the US Bankruptcy Code. The most commonly used bankruptcy provision among companies experiencing financial difficulties is Chapter 11. This primarily seeks to restructure businesses in trouble, by following a court-approved reorganization plan with an end-goal of earning profits again. Under this bankruptcy petition, the company management still maintains its daily business operations, but all important decisions must first be scrutinized and approved by a bankruptcy court. It is highly recommended that you consult with a lawyer who specializes in Chapter 11 Bankruptcy, with extensive experience in sorting out debt calculations, restructuring, etc.
A business may also file for Chapter 7 Bankruptcy. But this is not a very popular option as it requires a company to discontinue all of its operations, going completely out of business. Moreover, a bankruptcy trustee is also appointed, whose main task is to sell or liquidate all of the company's assets. All the monies will then be applied as payments for all of the company's debts to company investors and creditors.
Filing for a business bankruptcy requires a thorough review among the company's decision-makers. These decision-makers must ensure that their stockholders and employees will not lose out, or if they have losses such as the monies they have invested in the company, they will still have a chance at financial recovery, after the bankruptcy proceedings. Before your company finally decides to file for a business bankruptcy, ensure that you are making the right move in preserving your company's value as well as getting the chance to recoup any losses. The advantages of Chapter 7 and Chapter 11 Bankruptcy provisions enable you to: (1) Have the chance of rejecting or renegotiating disadvantageous contract terms or leases; (2) Renegotiate your secured financing terms, including interest rates; (3) Recoup any voluntary or involuntary payments you've made for redistribution among your creditors; (4) You can discontinue any forced liquidation, and get more time to sell your business in the open market; (5) Negotiate for new credit terms with your trade creditors and suppliers; (6) Request a stop to any collection lawsuits and other litigations; (7) Reject disadvantageous collective bargaining contracts; and (8) Discontinue involuntary receiverships and foreclosure. Keep in mind that filing for a business bankruptcy should be your company's last resort, after unsuccessfully trying out other alternatives to keep your business operating and earning profits. As much as possible, resolve your company's financial troubles outside of a bankruptcy court. But if you are being sued, or your bank has declared that your company has defaulted on your loan agreements, then it is time for you to file for business bankruptcy. This is the only way for you to work at regaining financial control through a court-approved debt reorganization plan.
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