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Business bankruptcy: Should you liquidate or restructure?

On Behalf of | Apr 5, 2022 | Business Bankruptcy |

Your once-booming business may currently be a pale shadow of its former self. The better days may be behind it as you struggle to remain current with your debts and other financial obligations. When you are finally at the edge, it may be time to make the hard decision. Should you file for bankruptcy?

While it seems a yes-no question, you still need to decide the fate of your company which depends on the type of bankruptcy you settle on.

Should you file Chapter 7 or Chapter 11?

There is no good and bad bankruptcy to file for if your business is in serious financial distress. It all depends on your financial situation and what you intend to achieve with the bankruptcy.

With Chapter 7, you are essentially shutting down the business for good. Operations will cease, and a court-appointed trustee will sell off your business assets to repay creditors in their order of priority. In essence, your business will cease to exist

However, you can opt for Chapter 11 bankruptcy if the business revenue potential is more than its liquidation value. It involves a reorganization of the company while it continues operations. Chapter 11 bankruptcy aims to revive your company and return it to profitable ways.

Making the right call

Settling on the type of bankruptcy to file for is never easy, especially when the future of your business is uncertain. On one hand, you have a business you hold dear, but on the other, it is in a very unhealthy financial position. It can be confusing choosing between the two options you have.

However, it will be a lot easier if you know what to expect with every kind of bankruptcy. Given that your company’s future lies with the decisions you make right now, you should make sure that you have experienced legal guidance.