It can happen to the best of businesses (as well as the worst), so when your finances go south, for whatever reason, there are things that you can do to help you and your employees work towards getting out of a difficult situation.
Debt management and cash flow are the key to running a successful business (and good selling, marketing, and administration are the drivers for this), but if things do go wrong and you find yourself in financial difficulties, then you need to know what you can do about it. This is where the option to file for Chapter 11 bankruptcy could be what your business needs, so it’s worth taking a little time to understand when you should file, why you should do it, and how to move the process forward.When to file
When you reach the stage where debtors are clamoring at the door for repayment and you haven’t got the money, then you should move on with filing for Chapter 11 as soon as you can, provided it is appropriate for your business. Ideally, you will have prepared for this eventuality before the debtors are at the door, and you should take advice from an experienced legal professional in the field.
If you want to work to save your business – one you may have spent many years building up – then you need effective help. Nowadays, you don’t have to have it come crashing down around your ears – Chapter 11 offers you serious opportunities to reorganize and restructure with a good chance of strengthening your business for the future.
How to start
You need to file a petition in the bankruptcy court – usually this is voluntary. You will generally take the initiative, though your creditors can band together to file an involuntary Chapter 11 petition.
Operating the business
As the debtor, you will carry on operating your business as usual in most cases. You will be known as the “debtor in possession.” The court could appoint a trustee who would take over your business operations if it believed that your affairs as debtor related to dishonesty, gross mismanagement, fraud, or incompetence.
After you file for Chapter 11, you will in most cases develop and put forward a reorganization plan within four months. Effectively, the plan is a contractual obligation between your creditors and you, demonstrating how you will pay off your debts as the business continues to operate.
This is where sound advice is essential, and it is something you could explore with specialist lawyer Suzzanne Uhland. She works and has worked with many organizations looking to restructure and reorganize under Chapter 11, and she has a wealth of experience in areas such as bankruptcy compliance as well as representing parties in bankruptcy sales under Chapter 11, distress transactions, and complex reorganizations.
When you are looking into the reorganization of aspects of your business, bear in mind that some of your operations may need to be downsized. You will thus reduce expenses and free up assets, but you also need to bear in mind that creditors could put forward “liquidating plans,” in which everything is shut down and sold so that creditors will get at least something out of it.
Confirming the plan
When the court approves your plan, you have “confirmation” and you have permission to proceed with the restructuring and reorganization of the business. The court needs to agree that the plan is realistic, feasible, and equitable for creditors.
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Chapter 11 can be complicated and there are upsides as well as downsides to this. If you take legal advice sooner rather than later, you will be able to decide if it’s right for you.