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Struggling businesses may be eligible for Chapter 11 bankruptcy

Owning or running a business can be an extraordinarily complicated undertaking. Decisions that need to be made are often difficult and can affect dozens, hundreds or even thousands of people so it is important to make these decisions thoughtfully and only when fully informed.

This can be even more important when a company is struggling financially. The economy has yet to completely bounce back from the recent recession, but there is certainly hope that with time, companies will be able to recover and be profitable again. In order to get to that point, it may be wise to consider filing for Chapter 11 bankruptcy protection in the meantime.

Chapter 11 bankruptcy is an solution primarily used by companies who are dealing with profitability problems that are likely temporary and due to extenuating circumstances, like a recession or impermanent loss of certain resources. If a company still anticipates a recovery but cannot cover debts in the short-term, Chapter 11 may be an effective option.

The goal of Chapter 11 is to suspend creditor actions for a period of time so that businesses can reorganize their debts and make a plan for profitability. It will be necessary to renegotiate loans and contracts, and debts will be prioritized in a way that is agreeable to both the company and the creditors. Ultimately, the goal is to reorganize debt in such a way that the company has a chance to become profitable again.

If it seems unlikely that the business will actually be able to recover even with repayment plans in place, a filing for Chapter 11 may ultimately be converted into a filing for Chapter 7. This means that a company's debts -- or at least some of them -- will simply be discharged and assets could then be liquidated.

This is a very broad overview of how Chapter 11 works and why it can be a good option for companies across Nashville struggling to survive. For a more thorough explanation and to discuss a specific case, it can be wise to consult an attorney familiar with Chapter 11 bankruptcy options in Tennessee.

Source: FindLaw.com, "Chapter 11 Bankruptcy," accessed on April 9, 2015

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