What To Consider When You're Looking Into Bankruptcy For Your Business
Disclaimer: This article should not be treated as legal advice. It’s recommended that readers still consult legal counsel and contact a lawyer should they have any concerns regarding bankruptcy for business.
If you've been running your business for a while, you may have encountered a lot of bumps, highs, and lows along the way. Chances are, you've built yourself a few plans in order to deal with these certain situations, or maybe you're experienced enough to deal with these as they arrive. It might come as a surprise, however, to have this article tell you that it might also be a smart idea to look into what to consider when you're looking into bankruptcy for your business.
A lot of business owners might say treading this territory might be a bad idea, as this acknowledges the assumption that your business might, in fact, meet bankruptcy in the future. However, it's important to understand the reality that nothing lasts. Instead of being negative about it, however, it's best to be able to anticipate how things go should push comes to shove. Knowing what to consider when you're looking into bankruptcy for your business can be the best move if you have to save your finances should the worst happen.
If you think looking into bankruptcy is a confusing decision to make, it's best you take the time to consult a legal and financial professional in order to fully understand what you should be focusing on now that bankruptcy has been introduced. Your path to the future could be affected depending on the kind of advice they give to you. Intuit's QuickBooks Resource Center also has a neat set of considerations for you to take if you’re tackling business bankruptcy.
Consider the Purpose
Try to assess the reasons behind your bankruptcy. This can be a bit redundant, but it's important to weigh in the risks, the costs, and the rewards bankruptcy could provide for your company. Sometimes, businesses resort to bankruptcy because of large debt, and filing for bankruptcy can help alleviate some of the load needed off that debt. Regardless of your debt relief options related to bankruptcy (be it a Chapter 11 reorganization, a Chapter 13 debt repayment plan, or a Chapter 7 debt discharge plan), be sure to check if bankruptcy is really your way to go.
- For instance, do you want to operate in the future and hope to achieve a profitable status? Or perhaps do you plan to close your business for good? Knowing this beforehand can greatly affect your company's future with or without bankruptcy, which will be explained later.
- Consider this, how much of your debts are guaranteed by other people, or yourself? Sometimes, filing for bankruptcy doesn't necessarily stop collectors from conducting activities against the cosigner(s) or guarantor(s).
- Ask yourself, do you need a form of immediate relief for a problem your company has? These include foreclosure, garnishment, utility shut off, eviction, or repossession.
Consider the Legalities
Assess the legalities of the situation. Some countries have bankruptcy rules that don't necessarily need attorney representation. However, as a business, you might be much better off with a lawyer. This is especially the case if the lawyer is a bankruptcy lawyer or someone experienced with financial matters. This is because a lawyer can help you decide on bankruptcy matters, especially on the legalities involved in the situation.
- Also remember that a bankruptcy proceeding doesn't necessarily take into account the privacy of your company. Undergoing privacy means exposing your company's activities to the court.
Consider the Future
Another important consideration is to make sure you're still thinking ahead when it comes to your business. Filing for bankruptcy doesn't mean it's game over for your business, but that depends on the plans that you currently have.
- For instance, if you want operations to continue, try to assess if you have a plan in place that is realistic enough for your company to be able to return to a profitable state. Some good considerations include the kind of reorganizations to choose, or if a "turnaround" consultant is needed in order to hire new managers if creditors think the current ones you have aren't a good enough fit for your company.
- You have to decide if you're willing to follow the many rules and restrictions that can be in place if you operate a company that is in bankruptcy. You might be required to ask the court for approval if you plan on doing anything they require you to ask permission for.
When you think of bankruptcy for your business, avoid thinking of the option as an immediate game over. Businesses and the market are extremely volatile and sensitive to various issues and trends, which means ups and downs are extremely common. If you think bankruptcy might be a move to consider, it's important to know what to ponder when you're looking into bankruptcy for your business. Being knowledgeable on the matter and seeking the advice of legal and financial professionals can greatly help clear out misconceptions and things we weren't able to understand on the subject matter.
When it comes to things such as bankruptcy, it's essential to learn what you can, especially what to consider when you're looking into bankruptcy for your business. This is because a business, unlike your personal finances, has an entirely different set of considerations to check when bankruptcy has entered the mix. Knowing where the line is between the two can save you a great deal of time and resources when tackling the subject.
Bella Flanagan has dedicated much of her life to law, and her pieces as a writer are imbued with her wisdom obtained from over 20 years of experience in business. Bella enjoys hanging out with her grandchildren when she has the free time.