When big businesses have to file for bankruptcy, the court proceedings might make the national news. Local business bankruptcies can also draw media attention at the regional level, especially when a bankruptcy might result in layoffs.
As the owner or financial executive of a business, you may sometimes have to make very difficult decisions. It is crucial that you keep the long-term solvency of the business your top priority. You should not let exaggerated myths about business bankruptcy or concerns about stigma keep you from making use of this valuable protection for your company during its financial struggles.
Don’t believe these bankruptcy myths
One of the most common myths that people tell about business bankruptcy is that it always results in the business failing. People may point to some large-scale business closures, like the slow decline of Blockbuster after its 2010 filing, as proof that restructuring won’t save a company.
Some forms of bankruptcy do directly relate to the closure of a business. Liquidation bankruptcy or Chapter 7 filings are common when companies close as a means of ending debt-related liability, but other forms seek to help the company remain operational.
Another persistent myth is that business bankruptcy will end your relationships with vendors and businesses that provide your company with crucial services. While it is true that there is a social stigma associated with bankruptcy, your decision to file won’t automatically lead to other businesses refusing to work with your company.
Bankruptcy may affect your credit options and may limit what transactions you can undertake, but it can also help you rework your budget to preserve your most crucial relationships.
Bankruptcy can help you streamline
Perhaps the business as it currently exists is no longer solvent or salvageable. However, there are core resources workers, who will play a major role when you start to rebuild. Bankruptcy gives you an opportunity to deprioritize certain financial obligations and to drastically alter your business operations.
You could close multiple facilities, conduct layoffs and potentially reduce how much you pay on your debts each month as part of the bankruptcy process. Bankruptcy can be a step that actually helps your company become profitable again and keeps it from closing down entirely.
Overcoming the stigma attached to bankruptcy filings and educating yourself about certain myths may help you make use of this powerful financial tool for resolving your business debts.