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When Escondido businesses consider bankruptcy

Escondido business leaders make important decisions every day. In the best case scenarios, hopefully those decisions are on how to re-invest profits into the business in order to expand a customer base and increase profit margins. However, the unfortunate reality of the current national economy means that many businesses are making much different decisions, including whether or not to file for bankruptcy.

When a business arrives at a point where a bankruptcy filing needs to be considered, chances are that things have not been going well for some time. For most businesses, there are two types of bankruptcy that can be considered: Chapter 7 bankruptcy and Chapter 11 bankruptcy. A recent article discussed the different advantages and disadvantages of each type of bankruptcy filing, as well as the thought process many business leaders will need to go through in coming to a final decision.

One of the first steps is for business leaders to decide whether or not the company can remain a viable - and profitable - entity. If there does not appear to be any way to salvage a company's business model, Chapter 7 bankruptcy, also known as "liquidation" bankruptcy, can be the chosen option. Under this type of bankruptcy filing the company's assets are sold off to satisfy debts, and the business is shuttered.

However, for those business leaders who decide that the company could possibly be turned around - even if it means going through a Herculean effort - Chapter 11 can be choice. Although filing for bankruptcy is never a popular option, a Chapter 11 filing can lead to an agreement with creditors on business debt, as well as allowing the company to file a reorganize plan to lay out the vision of how to return the business to profitability.

Source: Smart Business, "How to decide whether to declare bankruptcy," April 1, 2013

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