Ganje Law Office

Your company is in financial crisis. How can you deal with mounting debts in the face of today’s economy? If you’re considering bankruptcy, you should also consider non-bankruptcy alternatives like workouts and turnarounds. Ganje Law Offices offers professional advice from an experienced business bankruptcy lawyer. We are here to work with your company to determine whether filing for bankruptcy is the right solution and to help you resolve your business’s financial difficulties. Recognizing that resolving business debt issues out of court may be the best approach, our firm offers your company the means to settle its financial problems.

What Is Bankruptcy?

Corporate bankruptcy is a way for your business to legally resolve unmanageable debt through the court system. In the United States today, there are four main types of bankruptcy:

• Chapter 7 bankruptcy: Often called “liquidation bankruptcy,” the business closes and the assets of a company are sold off to satisfy creditors.
• Chapter 11 bankruptcy: In this type of corporate bankruptcy, the business is reorganized and debt is restructured to enable the business to continue to operate.
• Chapter 12 bankruptcy: This is a specialized type bankruptcy for family farmers and fishermen.
• Chapter 13 bankruptcy: More commonly used for personal bankruptcies, this type of bankruptcy is also called “wage-earner bankruptcy.” It allows an individual to keep their property and repay debts over time; while Chapter 13 cannot be used for corporate or partnership business bankruptcies, it can be used by a sole proprietorship.

If your company is under financial stress, something must be done to resolve your money problems, but a corporate bankruptcy isn’t always the best choice. Consider:

• The process of financial restructuring and negotiating a workout with business creditors is a way to avoid the expenses and bureaucracy involved in a bankruptcy filing.
• A Chapter 11 bankruptcy filing is expensive, time consuming, and the ensuing reorganization can be less successful than a financial restructuring.
• The goal of a business turnaround or financial restructuring is to provide a cost-effective approach to resolving a business’s financial difficulties by way of a non-bankruptcy business reorganization, ideally restructuring business debts and regaining liquidity and profitability.
• A financially stressed business’s creditors often share the similar goal of returning the business back to financial security. Frequently, the creditors realize the wisdom of avoiding bankruptcy proceedings, which often will leave their debts unsatisfied.

Business Bankruptcy Alternatives

There are several ways to avoid corporate bankruptcy proceedings through alternate strategies including:

• financial restructuring and workouts
• turnarounds

If the company’s goal is to continue in business–particularly under the current ownership–then a creditor or a lender workout should be considered. If new ownership, or sale of the business in whole or in part, is an acceptable outcome so long as the business is preserved as a going concern, then an additional non-bankruptcy alternative would be a business turnaround.

Financial restructuring and workouts involve working closely with a business’s creditors to create, or work out, a plan to restructure business debts while allowing the business to remain viable. This process allows the business entity to negotiate its debts in a way that enables it to regain profitability and liquidity without involving the court system. Restructuring and workouts are more successful when the struggling company contacts a business bankruptcy attorney early. Creditors often share the same objective of returning a financially stressed business to good financial health in order to ensure their debts are fully satisfied.

A turnaround may also utilize the availability of debt restructuring and workouts, but a turnaround has several other components. A turnaround will generally restructure the operational aspects of the business. This may be the solution when the company’s problem lies deeper than lack of cash flow. Where a creditor will not restructure the debts owed to it, a turnaround will be utilized to find alternative financing or new ownership. The sale of ownership or a portion of ownership can provide liquidity at the expense of a change of control of the business.