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Liquidation or Chapter 11? Businesses often face tough questions

Many of our Escondido readers who are familiar with previous posts here know that California businesses have a variety of options when profits begin to shrink. The economic turmoil of the last several years has forced thousands of businesses to take a hard look in the mirror and come up with a new model for achieving success. For some, that internal review resulted in the decision to file for bankruptcy. But, if a company does come to that decision, there is yet another decision to make: what type of bankruptcy will the company file?

For one California company, OCZ Technology, the decision was recently made to file for liquidation bankruptcy. The reports indicate that the business has a tentative agreement to sell all of the company's assets to tech-giant Toshiba, if the conditions on a list of prerequisites are met. The sale, if it goes through, will apparently take place as part of the bankruptcy filing.

While liquidating a company is common when business leaders decide that there is no way to continue operating the company at a profit, there are other options when all hope isn't lost yet. Some companies simply need to reprioritize and reorganize, and that is where Chapter 11 bankruptcy can come into play.

While Chapter 11 does offer the hope that a company will be able to continue to operate, the process is not without bumps in the road. Business leaders who decide to file for Chapter 11 bankruptcy will need to put in a lot of work, planning for a reorganization of the company's structure, coming to agreements with creditors on business debt and, unfortunately, sometimes reducing the company's workforce. But, if all of the requirements are met and the Chapter 11 process is completed successfully, the prospect of being able to return to profitability can make the decision to file for Chapter 11 bankruptcy easier.

Source: San Jose Mercury News, "Biz Break: San Jose's OCZ plans to file bankruptcy, sell assets to Toshiba," Jeremy C. Owens, Nov. 27, 2013

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