Before hiring liquidators, here's what to know about
business shut down.
For a small business owner whose finances are spiraling out of control,
corporate Chapter 11 bankruptcy may seem like the only answer. While
corporate Chapter 11 bankruptcy looks like a good solution, most
business owners should consider several other choices before going
to this extreme. If you have explored all other possibilities and
have decided that corporate Chapter 11 bankruptcy is the best choice
for you and your business, here are a few basics you should know.
What Happens to My Business When I File Corporate Chapter 11 Bankruptcy?
When you file corporate Chapter 11 bankruptcy, your business continues
to run as usual but there is an important change. You have some new
partners. A bankruptcy court must approve all significant business
decisions you make for your company. Although the court protects
your business from creditors, the goal of corporate Chapter 11 bankruptcy
is keep your business's doors open while you pay off your debt. Therefore,
the bankruptcy court oversees your business decisions to ensure you
are working toward meeting that goal.
How Do I Form a Plan When Filing Corporate Chapter 11 Bankruptcy?
When you file corporate Chapter 11 bankruptcy, the judge will order
you to create a reorganization plan that details how you intend to
get out of debt. If you have shareholders, they, along with your
creditors and bondholders, get to vote on your plan. Even if they
reject the plan, the court can still put the plan in place if it
feels it is fair to all involved.
Can My Securities Still Be Traded if I File Corporate Chapter 11
Bankruptcy?
If you own a publicly traded business, you can still trade securities
even after filing bankruptcy. Because of the listing standards upheld
by the New York Stock Exchange and the Nasdaq, you probably won’t
be able to be traded in these venues. You can, however, still be
traded on the Pink Sheets or on the OTCBB. The likelihood of having
someone buy securities in your company after filing corporate Chapter
11 bankruptcy is low, however, because the risk of loss is so high.
Why Wouldn’t I Want to File Corporate Chapter 11 Bankruptcy?
While filing for corporate Chapter 11 bankruptcy may seem like the
logical response to a failing business, there are several reasons
to avoid it. First, it puts a huge black mark on your record with
your creditors. You will have difficulty overcoming this. Second,
it destroys your business relationships. Will your business customers
and suppliers view you the same way? Probably they will not. Third,
and most importantly, approximately 90% of businesses that file corporate
Chapter 11 bankruptcy end up liquidating their assets and going out
of business when it comes time to the bankruptcy attorney. So, be
sure to explore every other option available before taking this drastic
step.
Surprising
facts about bankruptcy attorneys. Read vital factor #2 carefully.
|