Many small business owners have poured their hearts and souls into their work, and their businesses represent a source of pride and accomplishment. To these small business owners, the idea of filing for bankruptcy may seem like declaring failure. In reality, however, a filing a petition for relief under Chapter 11 of the Bankruptcy Code may be the best move a financially-strapped small business can make.
Financial difficulties are a strain on any small business. These troubles may stem from a variety of causes, including under capitalization, poor cash flow and increased competition in the marketplace. Whatever the cause, when a small business faces mounting debts, business owners should evaluate all the potential options available. These include restructuring outside of court by negotiating with lenders and creditors, Chapter 7 bankruptcy and Chapter 11 bankruptcy.
A Chapter 11 bankruptcy case gives businesses the opportunity to reorganize finances to pay off debts while continuing operations. Small businesses often emerge from Chapter 11 stronger and poised for successful futures.
There are several benefits a business may realize by use of a Chapter 11 case. A temporary "stay" prevents creditors from taking any legal action against the small business. This may provide some much needed breathing space for business owners as they attempt to reorganize.
The ability to shed or renegotiate debts is a significant benefit of filing for bankruptcy protection. Debt relief may involve the review of loans, rejecting leases for unprofitable locations as well as burdensome contracts. These actions can have a significant impact on a business's bottom line and create a sound foundation for future business growth.
Additionally, a court case may save business owners time. Instead of individually negotiating terms with each lender, all the matters are consolidated into a single action and plan of reorganization. By saving valuable time, a business has the opportunity to return to profitability sooner rather than later.
Once a business emerges from Chapter 11, business owners are often reenergized and better positioned to compete in the marketplace. Businesses are often leaner and more efficient as a result of the reorganization. Moreover, businesses may attract new investors since old debts are satisfied.
If you are a small business owner facing financial hardship, contact a knowledgeable business bankruptcy lawyer. Hiring an experienced business bankruptcy attorney can be vital to ensuring a well-executed small business bankruptcy. An attorney can advise you of all your available options, suggest when filing for Chapter 11 may be in your best interests, and guide you through the reorganization process in an organized fashion.
