3 key
guidelines when restructuring your business. Debt & operational
restructuring.
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.
Restructuring
business? How to turnaround your business and avoid
bankruptcy.
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