24 Oct Filing For Bankruptcy: All About Your Business & Chapter 11
As a business you have many assets that will need to be maintained in order to stay profitable. When you start to borrow more than you’re earning you may be faced with a choice.
Should you file for bankruptcy?
Filing for bankruptcy doesn’t have to mean the end of your business. It can actually help you get a handle on things and give you time to regroup and reorganize before your business’s finances get too out of hand.
Here are a few things about a Chapter 11 filing for bankruptcy if you own a business.
What Is A Chapter 11 Filing?
A Chapter 11 bankruptcy was built for businesses, small or large, that find themselves in a tight spot financially. It allows them to voluntarily file for bankruptcy. Typically individuals who need to file for bankruptcy choose to file under a Chapter 7 or Chapter 13 filing. In some cases an individual can file for a Chapter 11 bankruptcy if they make too much money and have too much debt.
When you start a Chapter 11 filing plan to be dealing with it for at least 6 months to 2 years. While it takes a while, a Chapter 11 filing is ideal because it allows the business to maintain control while filing. This allows the company to restructure and reorganize. Then they are able to return to a profitable state while consolidating their debts to make manageable payments.
A Chapter 11 can help prevent the loss of control of your company to the bank, which is every business owner’s nightmare.
When filing a Chapter 11 you are given a certain amount of time to return your company to a profitable state. This means you won’t have to come up with all the funds up front to handle your business’s current debt.
The bankruptcy court will agree upon a way for your company to consolidate its debt and create a manageable payment plan.
All decisions must be voted on by the higher ups of your company before any final conclusions are made. This includes any shareholders or bondholders your company might have. Any major moves by your company during the bankruptcy filing will need to be approved by the bankruptcy court before they are finalized.
In the event that your company cannot come to an agreement on any aspect of the filing your filing can be converted to a Chapter 7 and your company will go into liquidation. This means your company will then be sold for profit in order to pay the debt owed. While this isn’t a good outcome it is a possibility and should always be considered before filing for bankruptcy.
Will Filing Help You?
Have you come to the conclusion that your current monthly debt payments are too much for your company to pay back and still make a profit? Then filing for bankruptcy might be an option for your business. It’s important that you only seek out bankruptcy as a last and final solution whether it’s for your business or your personal finances.
While bankruptcy has plenty of negatives the one positive it has is to possibly get your business back on track. With a rate of 10 to 15% of Chapter 11 filings resulting in successful reorganizations it may not feel like a Chapter 11 could work for you and your company. It’s an unfortunate truth that most Chapter 11 filings are converted to Chapter 7 and result in liquidation.
Having a positive mindset and going into the filing with the willingness to improve your company is what it will take to be successful and beat the odds. If you are determined to keep your company afloat and are willing to make the necessary changes then you just might be able to reorganize and become profitable again. However, if you let your pride get in the way and refuse to budge on anything you might end up with a liquidation on your hands.
Determining when to file for a business bankruptcy for your Minnesota business can be a difficult decision to make. You as the business owner have to decide what’s best for your company in the long run. Whether it’s to file for bankruptcy or to sell your company off.
If you decide to go the bankruptcy route we would love to help you. We can provide the tools and advice you need to take each step and file the right way.
We specialize in helping make the process smooth and successful and would love to have the opportunity to assist you.
No Comments