Posts Tagged ‘corporate turnarounds’
Bankruptcy Prevention Options: Is a Workout Right for Your Business?
February 5th, 2010 | 
Author: Do money woes mean your company has to file for bankruptcy? Not necessarily: corporate bankruptcy and a business workout are generally both options that can help your business resolve your insolvency issues.
Debating a bankruptcy filing can be one of the hardest decisions a business owner will ever make. With mounting debts, it can be hard to see how your company will ever overcome its financial woes. But there are almost always at least two options when your company is bordering on insolvency: corporate bankruptcy and a business workout.
Business Workouts
This bankruptcy prevention strategy can help you settle with creditors outside of the courtroom. These non-bankruptcy solutions involve working with your creditors to resolve your debts and enable the business to continue in operation. Including options to renegotiate and reorganize debt, business workouts can help your business regain liquidity without a costly, drawn-out bankruptcy filing.
If you’re wondering why creditors would be willing to renegotiate debt, the answer is simple: money. Bankruptcy proceedings ensure that many of your creditors get some repayment of the debt owed, but most creditors generally take a major hit. With a workout, they’ll likely receive payment on a greater portion of your debt. So instead of being unenthusiastic about renegotiating your company’s debts, your creditors are likely to be eager to participate in debt restructuring. It’s their best bet for having their debts fully satisfied!
Corporate Bankruptcy
However, if your creditors refuse to compromise and your debts have become completely unmanageable, corporate bankruptcy may be your only option. Depending on the organization and structure of your business, there are several options available for business bankruptcy. Filing a Chapter 7 bankruptcy results in the liquidation of your company, selling off assets to satisfy your debts. Filing a Chapter 11 bankruptcy involves restructuring your business to regain profitability and settle with creditors. Some assets may be sold off during this process, but the company will not be liquidated. To determine the most appropriate type of bankruptcy filing for your business and your particular financial situation, you’ll want to consult an experienced bankruptcy attorney. Keep in mind that for small business owners, a business bankruptcy will affect your personal finances, so it’s best to avoid it if at all possible.
With debts piling up, it can be hard to know if or when to file for bankruptcy protection—that’s why you need to call Ganje Law now. We can offer you expert advice on what’s right for your business, so don’t wait! Contact us today.
Posted in 
Tags: 
Corporate Bankruptcy FAQs: Answers to Common Questions
If you’re considering bankruptcy for your business, you’re sure to have tons of questions. That’s why we’ve compiled answers to the most frequently asked queries about business bankruptcy to help you make informed decisions!
The world of corporate bankruptcy law can be complex and intimidating. Don’t let confusion get in the way of making the best decisions for your company: read on to get answers to the most commonly asked corporate bankruptcy questions.
Q. What is bankruptcy?
A. When a business has financial liabilities that exceed their assets or is unable to meet financial obligations, that company is insolvent—unable to pay their creditors, the company must come to an agreement with their creditors regarding payment or file for bankruptcy protection. This judicial solution gives the courts the power to settle the company’s debts.
Bankruptcy proceedings can be initiated by the debtor or by the creditor (called an involuntary bankruptcy). Filing a bankruptcy petition affects all of your creditors including:
- Secured creditors (those with a lien on your property)
- Unsecured creditors (vendors, credit card companies and others without a security interest in your property
- Judgment creditors (creditors who have sued and obtained a judgment against the debtor prior to the bankruptcy filing)
- Creditors with super priority claims (those with priority over other creditors because of special rules within the bankruptcy)
- Creditors with administrative claims (creditors such as accountants or lawyers with priority because of their assistance in the bankruptcy filing)
Q. What does filing for bankruptcy mean for my business?
A. Filing a bankruptcy petition simply starts a legal proceeding, with no guarantees regarding the outcome. That is to say, the debtor will present evidence of its insolvency, but there is no guarantee that the court will declare them bankrupt. This statutory process gives creditors and other parties the opportunity to challenge the debtor’s allegations and object to the relief being sought by the debtor.
Filing for bankruptcy does immediately put into effect an “automatic stay,” an injunction that stops creditors from trying to collect their debts until the bankruptcy court rules. This stay is issued against all creditors upon filing a bankruptcy petition. The automatic stay is designed to give debtors temporary relief from their financial obligations, giving them the breathing room to figure out how to deal with their debts.
If the courts declare your company bankrupt, then a settlement will be worked out with your creditors to satisfy all or part of your debts. Depending on the bankruptcy chapter you filed under, different rules apply.
Q. What is a business workout?
A. A business workout is a non-judicial resolution of your company’s financial obligations. Business workouts are settlements between a company and its creditors that satisfy the businesses’ debts, enabling it to continue operation. Also known as bankruptcy prevention, these arrangements are made outside of the court system.
While it may be surprising that creditors are willing to participate in business workouts, they’re more likely to receive greater compensation for their debts if your company does not file for bankruptcy. Using an alternative to corporate bankruptcy proceedings benefits creditors as well as the debtor, because some, or even most, of the debt will not be repaid under a bankruptcy proceeding. Secured debt, unsecured debt, and tax debts can all be resolved as a part of a workout.
Bankruptcy is not Your Only Option
In today’s economy, more and more business owners are facing the prospect of bankruptcy. If your company is struggling financially, there’s a lot you need to know before filing for bankruptcy.
Financial difficulties can make running your business next to impossible—if you’re facing the prospect of filing for bankruptcy protection, there’s a lot you need to know!
Bankruptcy May Not Be Your Only Option
Even when debts are piling up and creditors are harassing you and it seem like there’s no end in sight for your money woes, corporate bankruptcy may not be your only option. There are non-judicial solutions, including workouts and turnarounds, that can be used to satisfy your business debts without declaring bankruptcy. These bankruptcy prevention strategies may be right for your company, so contact your local bankruptcy attorney for specific advice about your particular situation.
You Need a Bankruptcy Lawyer
Filing for bankruptcy without an attorney may seem like a great way to save money, but this plan is likely to backfire in the long run. Keep in mind that your bankruptcy lawyer is a professional with years of experience dealing with the complexities of bankruptcy law. As an expert, he or she has the knowledge and expertise you can rely on to successfully guide you through the bankruptcy proceedings. While it may feel like you’re all alone when your company is in dire financial straits, hiring a corporate bankruptcy attorney means you’ll have a pro on your side! Whether it’s helping you develop a viable alternative to bankruptcy or arguing your case in the courtroom, your business bankruptcy lawyer will be an invaluable asset to your company.
Bankruptcy Should Be a Last Resort
At first glance, bankruptcy may sound like a great idea if your company has financial problems: freeing you from unmanageable debt, bankruptcy protection does have a glimmer of allure. But bankruptcy should not be entered into lightly! In the case of filing a Chapter 7 bankruptcy, your company will be liquidated to satisfy your creditors, eliminating the business you worked so hard to build. Even with bankruptcy filings that don’t dissolve your company, you’ll be saddled with the social stigma of the bankruptcy, creating complications down the road. Bankruptcy can be a resolution for your insolvency issues, but be sure it’s your only option. Your bankruptcy attorney can provide specific advice and guidance, so contact them today
Corporate Bankruptcy Is NOT the Only Solution for Your Struggling Business: Explore Bankruptcy Alternatives to Satisfy Your Corporate Debts
The first question most business owners ask about workouts and restructuring is why will my creditors want to renegotiate debt? The simple answer is that bankruptcy often means creditors see little-to-no repayment of their debts. That means, in most cases, your creditors actually want to help your company avoid bankruptcy. Instead of being unenthusiastic about a workout, creditors will likely be eager to pursue debt restructuring. They know it’s the best option for having part or all of their debt repaid, and they’ll work with you to develop a successful financial workout.
When considering filing for bankruptcy, remember that bankruptcy is almost always more invasive than a workout. On top of being less expensive, non-judicial solutions like workouts and turnarounds have the option of being more private. Bankruptcy protection involves and astounding number of financial disclosures, schedules of assets and liabilities, and in-depth reports, exposing all your financial records to the courts and ultimately, the public.
Keep in mind that every corporate bankruptcy situation is different, so you should consult an experienced bankruptcy lawyer for advice. He or she can guide you through the options available for your specific business and help you decide on appropriate course of action. In these chaotic economic times, remember that your business is not alone: a bankruptcy attorney can help! Call your local bankruptcy prevention specialist today.
