Four Ways Small Businesses Benefit from Chapter 11 Bankruptcy

Posted on December 21, 2018 at 12:00pm by
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Chapter 11 bankruptcy is often portrayed as an option that is limited to billion-dollar corporations. However, your local Kansas City business—no matter its size— can enjoy the same protections Chapter 11 provides for giant companies. Here are four ways filing for Chapter 11 can help a business get back on track.

1.     Stay Open

Many business owners think of bankruptcy as synonymous with closing. The opposite is true. If your business is on the verge of closing due to creditor actions or foreclosure, a Chapter 11 bankruptcy filing is the first step you can take to stop the actions creditors take against the business. Instead of marking failure, this Chapter of bankruptcy is specifically designed as a second chance for businesses, because it allows businesses to stay open while restructuring their debts.

2.     Reclaim Control of the Quality of Products and Services

With financial affairs restructured, the business has more freedom to correct the issue causing the financial strain. If the business needs rebranding, improved internal structure, or better management, you will not be as encumbered with financial constraints, and can make needed corrections while repaying creditors at a sustainable rate. Financial stability also provides a chance to rectify any compromises you were forced to make regarding the quality of the product or services your business is known for.

3.     Rejecting Unfavorable Contracts

The financial restructuring privileges of bankruptcy include the opportunity to reexamine your current contractual obligations. You have the right to assume or reject contracts and unexpired leases once you file for bankruptcy. So, for example, if your business is paying above-market rent on a lease, you can choose to reject it. One special benefit—the ability to reject unfavorable leases and contracts can be used to close a select location of the business. Closing problematic locations can make a big difference in the success of a Chapter 11, and it is made possible through this privilege.

4.      Pause Pre-Bankruptcy Debts

The financial restructuring of the business is enabled by the automatic stay. The stay stops payments to unsecured debts and restructures the payments to secured creditors. Both actions protect your business from being overtaken with collection activities. Under the stay, you are free to negotiate sustainable repayment plans with creditors.

If your business is struggling but you’re not sure if bankruptcy is right for you, take advantage of a complimentary consultation with one of The Sader Law Firm’s experienced business bankruptcy attorneys. We have decades of experience advising potential clients on the best course of action for their situation. Call our Kansas City business bankruptcy lawyers to see if Chapter 11 is your best option at (816) 281-6349.



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