If your business is in serious financial trouble, if you can’t pay back your loans, or if you just feel like you don’t have any other options, you may have thought about filing for business bankruptcy.
If so, you’re not alone. In fact, business bankruptcies have been steadily on the rise for the past few years.
But is filing for bankruptcy really the right choice for your company?
Read on to learn about the pros and cons of filing bankruptcy so that you can make the best possible choice for your company.
The Two Main Types of Bankruptcy
If you’re considering filing for bankruptcy, you first need to decide if Chapter 7 or 11 is right for you.
Chapter 7 most likely means that your business will not reopen its doors. This is because you must liquidate all of your property and any savings you may have to pay off past debts.
Even then, unsecured creditors may not see all of the money they’re owed repaid.
Often times, there is nothing left for you to start your business over with.
In Chapter 11 bankruptcy, you slowly reorganize your business’s finances and debts. You’ll reach a specific settlement with creditors, and you’ll slowly pay off the amount the settlement states.
Then, you can resume business as usual.
Now, let’s look at the pros and cons of filing bankruptcy.
The Benefits of Declaring Bankruptcy
So, why would filing bankruptcy be a good idea?
First of all, because you no longer have to deal with creditors hounding you day and night. This can be a huge stress relief, and it allows you to actually focus on rebuilding your finances.
It also means that creditors likely won’t be able to file a lawsuit against you and that at least some of your outstanding debts not covered by assets will be eliminated.
Still, you should hire a lawyer to ensure that the process goes smoothly. Click on https://www.fcwlegal.com/bankruptcy/personal-bankruptcy-cincinnati to learn about the next steps.
The Cons of Filing for Bankruptcy
Of course, the main con of filing for bankruptcy is that it’s a serious hit to your company’s reputation – even if you’re able to rebuild.
You’ll also have to sell off most if not all of your business assets, and possibly even some personal ones as well.
This means you could lose your car, your computer, your office space, and more.
Additionally, the bankruptcy filing remains on your credit report for six years. This means it will be hard to apply for/get approved for loans in that time.
Keep Debating the Pros and Cons of Filing Bankruptcy
Above all, remember that deciding whether or not your company should file for bankruptcy isn’t a choice you should make overnight.
Meet with your board of directors, consult with an attorney, and connect with a financial advisor.
Above all, keep weighing the pros and cons of filing bankruptcy and how it will impact the potential future of your business.
Use our file form database to help you fill out important financial documents, draw up contracts with creditors and lawyers, and more.