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A Chapter 11 bankruptcy can help your business become stronger

| Jan 5, 2021 | Chapter 11 |

When you hear the word bankruptcy, it may make you feel like you’ll lose everything or be totally out of control. The reality is that bankruptcy is beneficial for many companies, especially when sudden changes in the economy or other impacts lead to heavy debts without the income flow needed to overcome them.

Chapter 11 bankruptcy is a kind if business bankruptcy that you may be interested in, because it helps you keep your business open and could help you make it more profitable.

Staying open during Chapter 11 bankruptcy

One benefit of Chapter 11 bankruptcy is that businesses are able to stay open while they take place. This allows your business to continue bringing in profits, so that those profits can be used to pay employees and assist in the restructuring process. Many businesses find that they can retain at least a portion of their staff while still remaining open as usual.

During Chapter 11, your goal is to reorganize your business with a court-supervised plan. Some of your debts may be discharged during this time, but others will be paid as part of your reorganization plan. Once you finish the plan, your business is likely to be more profitable as a result of the changes that have been made.

Chapter 11 bankruptcy cuts the fat from your business

The reality is that Chapter 11 does require you to cut down on expenses when and where you can. For example, if you have 10 employees but only need to have six on payroll, you may be looking at layoffs. If you have high debts from purchasing machinery that isn’t in use, it may be refinanced, returned or sold to pay off the debt and help you lighten your overall debt load.

Think about Chapter 11 bankruptcy as a way to not only consolidate and reorganize debts but also to cut away anything that your business doesn’t absolutely need. With the added benefit of having some debts discharged, it’s likely that you will have a stronger business when you emerge, which will help you recover faster and keep yourself profitable in the future.