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Struggling with business debt? A commercial bankruptcy could help

On Behalf of | Jun 27, 2022 | Uncategorized

In the United States, there are bankruptcy laws in place to help you avoid facing excessive debt. While most people don’t want to jump straight into going through bankruptcy, it is important that you know that it could be a helpful answer to your business debts.

Businesses have a few different options in terms of the kinds of bankruptcies they can choose from. For example, you may opt to go through a Chapter 11 bankruptcy to keep your business open while reorganizing your business debts. Alternatively, if you have a farm, you might opt for the Chapter 12 bankruptcy instead.

Why choose commercial bankruptcy?

There are times when it may make sense to go through bankruptcy instead of trying other possible solutions. For example, if your business is so far in debt that you can’t pay your workers and are falling behind on payments to vendors, now would be a good time to look into bankruptcy.

On the other hand, if you are still making payments on time but you’re worried about a few upcoming bills and a slowdown in business, you might benefit from other options like negotiating or consolidating down your debts outside of court.

Can you keep your business open with a commercial bankruptcy?

Sometimes. There are two forms that most businesses can choose to go through. Chapter 7 bankruptcy, the first form, is a kind of liquidation bankruptcy. It generally requires you to liquidate all nonexempt assets, meaning that you will likely have to close down your business. There are exceptions, but many people do end up closing their doors.

On the other hand, Chapter 11 bankruptcy is designed to give you time to reorganize your debts. With this kind of bankruptcy, you negotiate and consolidate debts, may lay off some employees or pair down your workforce. The goal is to emerge as a company running leaner but no longer in the red.

You have options if you’re facing struggles with debt

No matter what kind of business you run, you do have options. It’s valuable to learn more about bankruptcy and how it could be a possible solution when you’re dealing with business debts.