Business Bankruptcy: What are Your Options?

Jun 29, 2017 by

Your business can experience bankruptcy because of many reasons. Maybe the start-up cost is too high for you to get back easily. Maybe the profits are not significant enough to cater to the debts. Maybe the costs of operating the business doesn’t give you much financial leverage.

You may be bankrupt for different reasons, but one fact still remains – you need to solve it now. Below are some of the options you have if your business is in a crucial financial situation.

Filing for bankruptcy

Bankruptcy has always had this negative reputation from business people, but that needs to change. There are instances where bankruptcy is the very thing that will save them from their financial troubles.

There are different kinds of business bankruptcy, including Chapter 7, Chapter 11, and Chapter 12 – each has its own financial strategies and advantages. For example, the website of these Raleigh Chapter 11 bankruptcy attorneys has mentioned that Chapter 11 bankruptcy involves the restructuring of debts. This has various benefits, including protections against creditor harassment, keeping the business afloat during the bankruptcy process, and obtaining loans at favorable rates.

Negotiating with creditors

Chapter 11 bankruptcy is more about higher interest rates and lower payments, and though that is a viable option, it can also be expensive out front or in the long run. Negotiating with creditors without going to the bankruptcy court may be an alternative. You can do this by convincing all your creditors with a sound plan to restructure your business and cash flow, in a way that they will agree to renegotiate your payment plans.

This usually involves feasibilities regarding cutting costs of operations and selling assets that your business can live without. The only drawback here is that you should be convincing enough for all your creditors, because if you fail, the renegotiating may not take place.

Using ABCs

According to the website of the Bradford Law Offices, PLLC, Chapter 7 bankruptcy involves the selling of assets and using the proceeds to pay back the creditors.

However, there is an alternative to this known as the ABC, or the “assignment for the benefit of creditors,” wherein a business will be allowed to sell its assets on its own, unlike a Chapter 7 bankruptcy that may require a trustee to monitor the sale.

The obvious advantage here is that the business can ask for a bigger sale price, because it likely knows the nature of the industry it thrives in and has an idea of current pricing. Letting the business owner – you – handle the sale also makes the process less stressful for creditors, not to mention that the additional control will help you target more specific debts, like those that you may be personally liable to.

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