Bankruptcy is part of a business that most business owners do not want to face, but it is available for those businesses who are having a tough time keeping its’ doors open. A business could file bankruptcy to liquidate or close the store, but there is bankruptcy available to allow a business to keeps its’ doors open with a plan in place to get out debt. There were over 5,400 commercial bankruptcies filed in 2018. Commercial bankruptcy is facilitated by the use of Chapter 11. It is not the only type of bankruptcy, but it is the main option for most businesses.
Benefits of Filing Chapter 11 Bankruptcy
With the use of Chapter 11, Businesses can take advantage of:
- Opportunity to create a plan to get out of debt
- Allows businesses to continue operation
- Stops collections and lawsuits
By filing Chapter 11 bankruptcy, a business must provide a plan of action to how creditors will be repaid. The plan must be approved by the bankruptcy court. A commercial bankruptcy scarborough me company must have a plan approved by the creditors before it can be executed. In rare cases, if a business does not create a plan, creditors can create a plan. The plan will provide some expectation of when the debt will be paid. With a plan in place, a business could negotiate with creditors regarding a debt owed. Chapter 11 allows businesses to remain open and pay debt owned creditors with the intent of coming out of bankruptcy as a profitable business entity. Chapter 11 will help a business stop any activity related to the collection of debt. It helps businesses avoid lawsuits. Chapter 11 allows a business to focus on fixing the financial problems instead of worrying about debt collectors calling on behalf of creditors. In most cases, a business will formulate a plan that is acceptable and will be able to repay its’ creditors.
Some of The Steps of Chapter 11
Filing a Chapter 11 can be complicated and time-consuming; therefore, it is important for businesses to have the expertise on their side who clearly understand the process of Chapter 11. A business will have a bankruptcy hearing in the U.S. Bankruptcy Courts. There are nearly 84 jurisdictions a bankruptcy case can be heard. A bankruptcy petition is filed, and the petition will reflect the assets and liabilities of a business. A business also must file a disclosure statement, and it will reflect more information about its’ operation and business standing. The company will file a reorganization plan. The reorganization plan will show how the business plan to repay its’ creditors.
Filing Bankruptcy Never Be Afraid
Big companies, small businesses, popular companies or any type of company will file bankruptcy. If bankruptcy is the only option for the survival of a business, it should be considered. There have been many businesses who have returned from bankruptcy to become a strong company. The reality is there are cases when doors have closed when businesses have come out of bankruptcy but still fail to achieve success. Chapter 11
is one of many bankruptcies, but it is there to help and with the correct team a business can strive and become profitable once again.