Before filing for corporate bankruptcy, it’s important for corporations to carefully consider their options with help from a legal professional.
While mainly used by individuals, this option is also available to corporations. In such a case, assets belonging to the company are liquidated. A trustee is appointed to take charge. This option is suitable for companies with no other choices. At this point, an organisation has run out of alternatives and relies on this process to settle debts.
This bankruptcy option enables a business to restructure debt. The business can continue to function while supervised by a bankruptcy court and without any interference from creditors.
They may be consulted in the reorganisation plan, so they can receive partial payment. It is ideal for organisations that still have assets and a form of regular income.
A Chapter 11 filing may be voluntary or credit providers can file if they view a company as over-indebted. Lenders must agree to your repayment strategy however. A benefit is that property won’t be liquidated and it protects you from lawsuits. There are also risks involved and it may take up to two years to complete.
This is the most common form of corporate bankruptcy. Even though it is expensive, it is highly effective method. Corporates can always bounce back following the completion of the process.
Businesses cannot technically file. An individual may file to cover debts that have been accumulated as a result of a failed business venture. If you are sole- ownership and your personal finances are mixed with those of the organisation, this may work.
This applies to family farms and enables reorganising of debt while the business is still running.