Did you know that Puerto Rico has been involved in a bankruptcy issue for nearly five years? You may not think of states or U.S. territories as places that can go bankrupt, but they can take on debt loads and may have to restructure their debts to stay functional, too.
Puerto Rico struggled because of serious hurricanes, an economic crisis and earthquakes, all of which had a negative impact on the territory’s finances. This is a first, though. There has never been a public restructuring like this one anywhere in America.
What’s interesting about this topic is that unlike typical businesses that can go into Chapter 7 or 11 bankruptcy when they need to liquidate or restructure their debts, states and territories don’t really have those same options. The island, it was said, had up to three times more debt than Detroit. In 2015, the government in Puerto Rico stated that it had around $70 billion in public debt load. $50 billion was in public pension liabilities.
What kinds of bankruptcy exist for territories of the U.S.?
Not many, but the territory was able to file for a municipal bankruptcy in 2017. It works similarly to a Chapter 11 plan by allowing the government to restructure its debt.
Your business’s bankruptcy is simpler than this
Why point out a kind of bankruptcy that you won’t have access to under most circumstances? It just goes to show that literally anyone, even governments, can struggle with heavy debt loads. With restructuring plans, like municipal bankruptcies or Chapter 11 bankruptcies for businesses like yours, you can address an oversized debt load and find ways to repay what you owe without closing your business.
Chapter 11 bankruptcy will allow your business to reorganize its debts, get some debts discharged in some cases and repay others to make sure your business stays steady in the future. Many businesses come out of this kind of bankruptcy with fewer expenses and a better opportunity to be profitable in the future.
Bankruptcies are sometimes necessary, so don’t feel too negative about having to seek one. It may be the right option to help you get your company back on track.