3 key
guidelines when restructuring your business. Debt & operational
restructuring.
When a company is in dire straits, often a company bankruptcy
seems enticing. Your debt will disappear, and, if the company
has filed under Chapter 11 bankruptcy, the “fresh start” offered
by the reorganization is hard to pass up.
Good Reasons Why Company Bankruptcy Not Always Best Solution
But filing a company bankruptcy isn’t always the best
answer. For some companies, it could be the wrong answer, while
for others, there might be better options. Here are some reasons
filing company bankruptcy isn’t always the best choice.
1. You could lose much of the control over your company. Many
executives believe the bankruptcy laws allow them to control
their company's activities during a Chapter 11 company bankruptcy.
But this is misleading. Bankruptcy experts say business owners
must understand that other individuals will oversee and direct
their decisions during a company bankruptcy. Some of these people
include debtors, shareholders, and the court trustees.
2. Company bankruptcy is expensive. Depending on the size of
your debt, it might be more expensive to file bankruptcy than
to continue to run your business and try to save it. If you choose
to file company bankruptcy, you’ll have to hire good counsel,
and often other professionals who will charge a hefty fee for
their services. The cost of filing bankruptcy often surprises
business owners so consider these costs before you choose company
bankruptcy as your best alternative.
3. Company bankruptcy can take more time than you expect. This
process isn’t a quick. You don’t file bankruptcy,
see a quick turnaround of your fortune, complete the bankruptcy
and return to business as usual. Depending on your jurisdiction,
court may only hold hearings once a month. Sometimes, the court
may delay these hearings that are essential to the day-to-day
running of your business. This will slow down the whole course
of the company bankruptcy. If you choose to file a company bankruptcy,
understand that this process involves have a series of “sit
down and wait” moments for you.
4. Your employees might flee during the bankruptcy process.
Even if the company bankruptcy filing is a Chapter 11, or reorganization,
many employees might mistakenly believe the company is in such
dire straits as their job is in danger. Even if you reassure
your employees, you are sure to lose a few or more as people
seek more stable employment elsewhere. During this already difficult
time, you’ll have to hire more employees, or make do with
fewer people if hiring new employees is not possible. If you
do hire more people, consider the cost of hiring, training and “breaking
in” new workers.
Restructuring
business? How to turnaround your business and avoid
bankruptcy.
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