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Does bankruptcy mean you have to close your company’s doors?

| Apr 6, 2021 | Chapter 11 |

The general public often assumes that a business bankruptcy is the same as closing a business. There are various terms used, from “going under” to “shutting down,” but the implication is usually the same: The company has failed, and bankruptcy is just one step on the way to dissolving it. 

But is this true? You may be surprised to find out how this really works. 

Chapter 11 bankruptcy doesn’t mean that you have to close your business

As a business owner, you can file for bankruptcy and continue operating. You don’t have to close. You’re just trying to reorganize your debt and put your company in a position to thrive. If you tell someone that your business filed for bankruptcy, they may well assume you’re closing your doors, but you have far more options.

For instance, take the case of NPC International, a company that owns over 1,600 fast-food restaurants. They had to file for bankruptcy last year. They used Chapter 11. Not only did they not close down their parent company, but all of the individual locations kept making food, kept serving customers, kept employing workers and kept functioning — much as they had before the bankruptcy was filed.

The goal of Chapter 11, in this case and many others, is to help a company overcome financial challenges and turn things around. These challenges may not be the company’s fault, at all. Maybe the market simply changed in an unexpected way and the debt level your company is carrying no longer works. If you are in this situation, it’s important to know how legal tools like bankruptcy may help you.