Many people perceive bankruptcy as a frightening word. It is often associated with financial struggle, business shutdown, bottomless debt and a loss of assets. As large businesses file for bankruptcy all around Florida, you could be anxious about the future of your own enterprise.
But do not give up hope. There are steps you can take to protect your business even amid financial struggles.
Bankruptcy can be a tool to manage debt
While there are multiple types of bankruptcy, all of them are legal processes through which individuals and businesses struggling to pay off loans can seek some form of debt relief and make future payments more manageable.
Chapter 11 is one type of bankruptcy that can help keep small businesses alive during hard times. This route can allow you to:
- Make debt manageable: Chapter 11 or “reorganization bankruptcy” means you can propose a reorganization plan for your business debts and assets. This could make it easier for you to pay your loans moving forward.
- Keep the doors open: Under Chapter 11, you retain possession of your business and it does not have to cease operations. This is so that you can pay off your creditors.
- Obtain future loans: With court approval, you may even take on future loans if needed to keep your business afloat.
However, keep in mind that by initiating Chapter 11, you must propose a reorganization plan for your creditors to approve. Your creditors can also propose one if you can’t come up with one in time. From here, you can begin paying off your loans under new terms.
Where do I go from here?
After initiating Chapter 11 bankruptcy, it’s key to consider your current financial standing.
Filing for bankruptcy gives you more breathing room from creditors looking to collect. This allows you time to assess how your business can improve financial health. You could look into:
- Improving the business plan
- Reducing operation costs
- Increasing savings
- Taking on less debt
- Re-negotiating terms with employees, suppliers and vendors
Temporary setbacks don’t have to be the end for your business. There are steps you can take to keep going even when financial issues arise.