Alternatives to filing for a business bankruptcy

Alternatives to filing for a business bankruptcy

On Behalf of | Nov 10, 2020 | Uncategorized |

Small businesses in the Tampa area may run into trouble with debt for a number of reasons.

Businesses can run into a bump in the road of the overall economy or a particular sector in the market takes an unfavorable turn, meaning the business has to operate at a loss until conditions improve.

However, even in a healthy economy, business may run into tax trouble or other costly legal issues.  Mistakes at the top of the business, such as a critical financial or managerial error, can also put a business behind on important debts.

Bankruptcy is not always the best option for a small business

Bankruptcy is almost always a legal option that a struggling business should keep in mind. However, there may be better choices.

For example, a Chapter 7 bankruptcy may be of limited value to a business since it effective means shuttering the business and turning over assets to creditors. If the business has viability, it may make little financial sense to close.

While some business may be eligible for a Chapter 11 or Chapter 12 plan that would allow a business to reorganize its finances and pay off all or a portion of debts over time, this is a costly process that may be overkill for some situations.

A debt workout outside bankruptcy is another option

In some cases, it makes more sense for a business to work out separate payment plans with its creditors or even with just a single large creditor. Often, it is good to have an experienced attorney help with this process.

Especially in the world of business, creditors frequently have incentives to help their debtors reach an agreeable solution that keeps the business operating smoothly.