Tennessee businesses fall into financial distress for a variety of reasons: economic downturn, risky investments and slow growth are just a few examples. Overtime, debts may accumulate and you may not see a way to repay your creditors.
You know that you have a viable business idea and that it could be profitable, but your amassing debts make that seem increasingly impossible. One option may be filing for Chapter 11 bankruptcy. While many business owners worry that filing for bankruptcy may take away their business, it may actually save it. How can Chapter 11 bankruptcy extend your business’s longevity?
Managing debt to allow for financial success
Chapter 11 bankruptcy was designed to save struggling businesses with a high potential for profitability. To file, you must show the court how you plan to restructure your business model to turn a profit moving forward. Your first step is to address your overwhelming debt.
Restructuring your debt
The main goal of Chapter 11 bankruptcy is to get your debt under control so that you can manage your payments and find a financially viable future.
You will negotiate with your creditors to either lower your debt burden, or create an extended payment plan that you can reasonably adhere to. More creditors may agree to reducing your debt obligation than you first anticipate. While this initially sounds strange, your creditors know that they will recoup more of their losses if they allow your business to restructure its debt and thrive than if you are forced to close your doors.
Not all payments can be negotiated
Before you create a reorganization plan, you must recognize that some of your debts may be discharged, while others must be paid in full, such as taxes and employee wages. It may be helpful to discuss your business’s debt and equity holdings with an experienced bankruptcy attorney to learn how to create a thorough plan to present to the court. If you are not able to demonstrate that you have a plan for future financial success, you may not be allowed to file for Chapter 11 bankruptcy.
