Corporate Bankruptcy

Protect and rebuild your troubled company

Turnaround Issues

A business failing clearly shows a business owner that he or she needs to make adjustments. With short profit margins, a business can only run for so many months or even weeks.

If the sales are not there, but the collectors are right around the corner, then a business may have need of filing Chapter 11 bankruptcy. Although, this seems like a last resort it can reduce some financial burdens and help an ailing business feel healthy again.

Has the business gone through structural changes? When looking at the business objectively, are there elements of the financial budget that seem out of line? Does the business offer a service that costs more than it brings into the budget?

To keep a business failing from dying, a business owner may need to cut back on advertising, operational costs, and downsize. This may mean cutting workers, moving to a more inexpensive location, or reducing inventory.

By cutting costs a business can sidestep the bankruptcy courts and do more with less.

Not all businesses can be turned around quickly. It takes time to improve a business failing in many areas. By reorganizing debt outside the court system, a business can stay active and hope to regain losses.

A small business owner may believe the business will succeed, but only time will tell.

Resolution by Corporate Bankruptcy

Corporate bankruptcy information & advice

Corporations facing financial troubles often look to corporate bankruptcy to cure their ills. But like any other medicine, a bankruptcy filing has many unforeseen side effects. If you are considering resolution by corporate bankruptcy, you must find out all you can about the process. Consider whether it is right for your specific situation. Resolution by corporate bankruptcy will drastically affect you and your company. Filing for bankruptcy may only relieve your business's symptoms not cure its ills which will continue to linger. Before you consider filing, there are several items you must know.

Knowing Who a Resolution by Corporate Bankruptcy Will Effect

Filing corporate bankruptcy will affect many people at your company, including you. Your business may lose its assets. Depending on the type of bankruptcy you file, you may have to shut it down. Likely, you will need to cut jobs and this affects your employees. You may not even to be able to provide them with severance or benefits. The bankruptcy court will refuse to pay some creditors and will shortchange stockholders and investors. By investors, I mean you. Yes, even you will feel the affects of filing bankruptcy.

Under the best conditions, you can continue to run your business. But the court will assign you a trustee. This person is your new "partner" who will now oversee all your business decisions. And you may think that bankruptcy will erase all debts. This is not the case. You still must to pay secured creditors and the court will force you to negotiate with a committee of them. Now for the worst case scenario . . . you can lose your business, your personal assets and your credit rating. If your business folds during bankruptcy, you will lose not only your personal investments in the company but also any personal guarantees you offered secured creditors. Many small business owners backed up their Small Business Administration Loans with a personal guarantee on their house. If the business cannot pay back this debt, the bank can take your home.

Choosing the Type of Corporate Bankruptcy

What happens during a corporate bankruptcy resolution depends on the type of filing you use. There are two types of corporate bankruptcy - Chapter 7 and Chapter 11. With Chapter 7, the court sells all business's assets and liquidates it. They court uses the money to pay off all secured debts. Here the business must close. Chapter 11 is when the owner reorganizes the business and tries to keep it running. The court may force the sale of some assets, but the main goal is to set up a new budget that allows the business to get itself out of debt. Both bankruptcies help a business clean up their finances and there are advantages and disadvantages for each. You must decide what you eventually want to do before putting in a filing for either type.

Sometimes, you will have no choice but to declare bankruptcy. The impact that bankruptcy has is undeniable. Sometimes a business will close their doors forever, other times it gets a business back on track. But there are other alternatives available to help your struggling company. So before you file for any type of bankruptcy, check out all of your options. You may not decide to declare after all.

When you are considering bankrupting or closing your business, this information will help.