Considering
chapter 11 reorganization? Here's what your attorney is
not telling you.
Many businesses fall behind with taxes, creditors, and loan
agencies. This spiral of debt can lead to Chapter 11 reorganization
measures. What does this mean for a business? First off, chapter
11 reorganization does not liquefy your assets. What does take
place is a reorganization of your business debt, hopefully
in such a way to provide you with a clear way out of debt.
It involves the courts. This does not mean you will lose your
business. However if you do not prepare, this can happen.
Chapter 11 reorganization tries to right your business debt
by calling in the creditors and those who you owe debt. The
court looks over your contracts and financial responsibilities
to decide whether you will be able to pull the business out
of debt. They do not proceed on blind faith. Business owners
must prepare a plan to get the business back on track. After
the courts review the contractual and debt obligations, they
may grant relief from the shackles of some debt.
How Chapter 11 Reorganization Makes Business Sense
The rationale behind chapter 11 reorganization is simple—save
the business. If the business debt exceeds that of the income,
then many times the stockholders or sole proprietor get nothing
after the court pays the creditors. However, many businesses
can resurface with some good sound restructuring of their debt.
The courts want to keep businesses afloat. Therefore, they
do their best to evaluate honestly what they can do for the
business.
Chapter 11 reorganization, as opposed to Chapter 7, does not
sell assets to cover the debt. If a business owner is unprepared
when dealing with the courts, the judge may decide the creditors
should own the company, or the court may simply liquefy the
business to pay off the contractual obligations and debt.
Chapter 11 reorganization can include canceling debts for
unsecured loans, union contract obligations, other operational
contracts, and real estate leases. This reorganization allows
the company to get out from under some debt and hopefully bounce
back to a profitable company. That is the goal of this type
of reorganization. Businesses that fail can hurt the economy,
so keeping these businesses going can help a community and
much more.
Chapter 11 reorganization is not the end of a business. It
can be a new beginning. With many businesses, the process seems
overwhelming and insurmountable, but with help from professionals,
the company can benefit.
How
to turnaround your business. You don't need expensive bankruptcy
attorneys or sleazy debt counselors to fix your company.
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