Economical shifts are often unpredictable. When you find yourself in its deep undertow, it may mean that to keep yourself, your family, and your business adrift, you’ll have to file for bankruptcy to stay head-above-the-tides of financial trouble. 

As you prepare yourself for this, here are pieces of expert advice from https://sasserbankruptcy.com/business-bankruptcy/chapter-11 to help you understand what Chapter 11 bankruptcy is, and how it can benefit you. 

Chapter 11 Business Bankruptcy: A Brief Overview 

As a category within the Bankruptcy Code of the continental United States, this type of bankruptcy involves the reorganization of the debtor’s business and financial structure, from business transactions, assets, debts, and the like. For this reason, it’s also considered a “reorganization bankruptcy”. 

Many believe this to be a form of a brand-new start. A fresh business overhauling. A clean slate, in the context of business operations and financial debts. This perspective isn’t far from the truth. 

Although this bankruptcy undertaking is renown for being among the heftiest in cost once put into action, if, after careful planning and examination, you find that this is the best solution against the downward spiral of your companies concurrent operations, then do read on to fully understand the advantages it implies. 

What Happens In A Chapter 11 Bankruptcy? 

1. Business Preservation 

This is a key motivator for why companies choose to file for bankruptcy. Yes, it’s a clean slate as aforementioned, but you won’t have to start from scratch with your clientele-base and the business’ goodwill. You will be allowed to create a new business model and let it run for the venture itself to, once again, be profitable. In other words, you won’t have to shut your business down, whether in part or as a whole.

2. Plan For Reorganization 

As its name suggests, it’s a chance for the business to reorganize its internal functions. This may include, but is not limited to, a reorganization of ownership, whether as a sole proprietorship, partnership, or corporation. Downsizing for expense reduction, debt renegotiation, etc are parts of the process as well. 

The purpose of this major reorganization and restructuring is to come up with a repayment plan wherein the business will be profitable enough to garner revenue that can be used to remunerate for its debt obligations. 

This, now, leads to number 3. 

3. Debt Repayment

Though it will be possible to negotiable debt obligations, this has more to do with being given room to come up with certain “reliefs” towards the actual repayment schemes to be agreed upon.

Since debt consolidation, management, and ultimately, debt settlement is the goal of this reorganization, a number of proposals may come into play, even from the creditors themselves.

For instance, there’s the possibility for interest rates to be adjusted. Certain types of debts may be deferred for a specific period. Assets will be looked into and liquified (cash conversion) to settle portions (if not all) of the financial liabilities, upfront. 

In addition to this, filing for bankruptcy will permit the business to have their creditor restore accelerated obligations back to their pre-default states. Accelerated obligations are when creditors demand that the full amount of the debt be repaid in a kind of one-time, aggregated lump sum. 

Filing for bankruptcy will help return said accelerated obligations back into a strategy that will permit a distributed repayment over a period of time.