Business Bankruptcy And Debt Restructuring - Information And Facts You Ought To Be Aware Of
When debts start weighing down on business operations and the business already encounters cash flow problems, then it might be the perfect time to go in for a round of debt restructuring or file for protection under a Chapter 11 business bankruptcy.
Business debt restructuring is the process of renegotiating or reducing debts. In this process, business owners would request that a part of their debts would be waived by creditors so that they may be able to experience a positive cash flow once more. Business owners would have to come up with a solid and doable plan, which would show creditors that if the latter would waive a part of their debts, then the company would become profitable again and have enough funds to pay the remaining debts.
It is important to note that a business owner must think of debt restructuring or seeking protection under Chapter 11 business bankruptcy only after the debts have turned delinquent. Every creditor wants his money back, so most creditors may agree to a debt restructuring process.
Debt restructuring is not as complicated and costly as a Chapter 11 business bankruptcy. But then, debt restructuring takes time, patience, effort and negotiation skills. Business owners must invest time and effort in talking to banks, and secured and unsecured creditors.
A Chapter 11 business bankruptcy typically sets the business owner back by $50,000. Debt restructuring costs are much lesser, what is only needed is spending time and effort for it. That said, Chapter 11 business bankruptcy offers a higher level of protection in some areas. For example, once a Chapter 11 business bankruptcy is admitted by the court, no creditor can make any collection attempt. The moment that a creditor would make a collection attempt, he would be held in contempt of court.
Since 2008, the economy has been on a steady decline. However, came early 2012, the initial signs of recovery were seen. What this means is that if the economy steadies or moves up, then the business climate will turn for the better. Therefore, owners of businesses who are still reeling from the recession, may choose debt restructuring and bide their time instead of opting for business bankruptcy.
For those business owners not in the loop, a brand new type of debt resolution has come about, which is called Debt Mediation. It involves a Debt Mediation company that negotiates with the creditors on behalf of the business owners. Essentially, the creditor is told to slash his debts significantly or face the possibility of not getting any money back at all.
Another option is to swap debt for equity. Businesses that have creditors, not willing to go for debt restructuring, could make a request to creditors to swap debt for equity.
Are you thinking about filing business bankruptcy? Should you have concerns, you would be wise to consult with a experienced and reputable chapter 11 bankruptcy lawyer, as well as consider all other options before choosing what makes sense for your business.