When Will You Know That It Is Already Most Suitable To Start Giving Chapter 11 Business Bankruptcy A Thought?
Chapter 11 business bankruptcy is also called as business reorganization. It involves filing a reorganization plan (along with specified financial documents) with a bankruptcy court. The court calls for a meeting of all the creditors who need to vote on and accept the reorganization plan by a 3/4th majority. The company then starts carrying out the plan and after execution, the business emerges from the bankruptcy and becomes debt free.
The Warning signals of Chapter 11 business bankruptcy:
- When the money that you have withheld for taxes is already being used. That money needs to be paid to government, however, if you already use it for business, it signifies that you are cash-strapped.
- Whenever you keep stretching payments to vendors for a long period of time, not able to pay vendors punctually, or when you are already desperate for credit and keep on switching vendors.
- When there is a critical situation affecting the business like death of a partner, or an embezzlement, or a natural disaster, etc.
- Inability to repay secured debt installments on time or unable to repay them anymore.
- When your business has one or two customers and they declared business bankruptcy.
Business owners tend to wait for better times and expect their creditors to listen to them, which is in fact one of the biggest mistakes they could make. Creditors want repayment of debts and will do anything to get their money back. A business owner must designate a Chapter 11 business bankruptcy attorney as soon as the warning indicators emerge.
Hiring an attorney can aid the business look into options other than bankruptcy as well. For example, the attorney will first evaluate the situation and then suggest a debt restructuring exercise or a debt-for-equity swap. If the business owner does not hire an attorney, then he is simply digging a deeper hole for himself.
There is no simple business bankruptcy. Child support, taxes, alimony, etc, which are classified as priority debts would have to be paid, and if the business owner's personal property has to be sold just to repay these, then it has to be done. When it comes to priority debts, the law does not take pity. So if priority debts are the cause why a business is struggling, then a Chapter 11 business bankruptcy is not the option but a Chapter 7 bankruptcy.