Businesses, just like individuals, can go through times of financial hardship. Maybe you run a residential real estate rental company and have non-paying tenants who have left you behind on your bills. Perhaps you ran into some issues with a supplier and had to close your manufacturing facility for several months while still incurring all of your standard operating costs other than staffing.
Falling behind on your bills could mean that you have to pick and choose what expenses you pay and what ones you delay. When your business has enough debt, you could find that it affects your daily operations.
Unpaid balances could affect your company’s ability to secure or use revolving credit for business expenses. It could also lead to collection activity, including lawsuits. When you face operations issues or legal action from creditors, it may be time to consider business bankruptcy.
Filing bankruptcy doesn’t mean your business must close
Myths about the bankruptcy process seem to be better known by people than the truth about bankruptcy. Some people think that only a business about to close its doors can file for bankruptcy.
While it is true that those who have decided to shutter their businesses may benefit from Chapter 7 bankruptcy to discharge the company’s debts and any of their own debt related to the company, many other forms of business bankruptcy focus on regaining financial control and keeping the business solvent.
When you file, the courts issue an automatic stay that will temporarily stop collection activity. Depending on the kind of business bankruptcy you file, you may be able to renegotiate your company’s debts or even restructure the company itself.
Are there other options?
Restructuring your company and renegotiating your debts can be alternatives to bankruptcy, not just something you do when you have filed for certain kinds of business bankruptcy. You may be able to arrange a different repayment plan with your creditors by restructuring your debt or even reorganize the company, possibly engaging in layoffs or moving to a new facility to keep your costs lower.
Exploring all of your options for regaining control over your business’s finances can help you keep the company operational after a period of financial hardship.