People often say that there is great money in the commercial transportation industry because they hear about the salaries that semi-truck drivers command or learn about how much of the domestic economy depends on over-land transportation. In reality, many transportation companies operate with razor-thin margins because of fuel costs, fleet maintenance costs and those competitive wages that their drivers command.
Trucking companies sometimes overextend themselves. Between operating costs and attempts to secure credit for budget shortfalls, such as the use of freight factoring services, they may not have enough revenue each month to cover their costs. More aggressive debt solutions, like bankruptcy, may become necessary.
Bankruptcy can mean closure or a more profitable future
Occasionally, the decision to file for bankruptcy is related to the realization that the company is not solvent and needs to close. A Chapter 7 bankruptcy is a way for a business to eliminate financial obligations while liquidating any valuable assets to repay creditors when necessary. Businesses can also file for Chapter 11 bankruptcy, which can facilitate restructuring.
Restructuring may lead to layoffs and negotiating new payment plans with various creditors. For example, a Chapter 11 bankruptcy might allow a trucking company to drastically reduce what it has to pay to a freight factoring service provider each month for prior lines of credit, which can help the company balance the budget and keep the paycheck clearing the bank account.
Chapter 11 proceedings can also give a business the leverage it needs to shut down some of its facilities despite an ongoing lease and redirect what assets it has toward the expenses that are absolutely necessary to keep the company operational. In a successful Chapter 11 filing, a trucking company may be able to get out of financial arrears and eventually discharge its remaining debt while simultaneously balancing the business budget.
Sometimes, trucking bankruptcies have major implications for employees and workers, including the possibility of keeping the company open and following through on obligations to both creditors and employees. Evaluating business bankruptcy as a possible solution for an organization plagued by unsustainable levels of business debt might mean the difference between the company closing down or overcoming a short-term financial issue to become a truly sustainable business.
