For some companies that go through the Chapter 11 bankruptcy process, it is the only time when the company really needs to focus on an overhaul, change a business model and get back to the business of profitability. For others, however, going through Chapter 11 bankruptcy is no guarantee of turning things around.
In Part I of this two-part series, we began to take a look at some of the important factors that need to be considered before a business bankruptcy is filed. Here, in Part II, we will continue to examine some of the important questions business leaders need to ask themselves before deciding to go through with a bankruptcy filing.
Any company that begins to seriously consider the prospect of filing a business bankruptcy will likely encounter one undeniable truth: there are a wide variety of factors to consider before actually taking the plunge. With both Chapter 7 and Chapter 11 bankruptcy as potential options for companies that are experiencing significant financial problems, the decisions that will need to be made could alter the course of history for any given company. Here, in Part I of a two-part series, we will begin to take a look at some of the factors that companies need to consider before deciding whether to pursue a business bankruptcy filing.
Many of our readers may remember a previous post here that detailed the Chapter 11 bankruptcy filing by Relativity Media, a movie studio based in California. At the time of the bankruptcy filing, there was a lot of uncertainty as to whether Relativity Media would be able to continue running their operations, or if the company would be bought by outside bidders. Now, it appears there may be a little bit more clarity.
Any of our readers who are familiar with previous posts here regarding Chapter 11 bankruptcy probably remember that submitting a reorganization plan is a key part of the bankruptcy process. The plan is not only focused on debt reorganization, but also on potential reorganization moves within the company in order to streamline operations and - hopefully - return to profitability.
Many of our Escondido readers have probably had the chance to get out to the movies this summer. There have been plenty of blockbusters to choose from during the typically ramped-up summer movie season, but there have been plenty of movies that have underperformed as well. For one movie studio, it appears that a track record of underperforming movie productions may have played a role in the recent decision to file for Chapter 11 bankruptcy.
Not all bankruptcy filings are complex. Many filings under Chapter 7 of the bankruptcy code can actually be fairly straightforward and can be concluded in only a matter of a few months. However, Chapter 11 bankruptcy proceedings can be a different story, as a company that files for this type of bankruptcy protection is probably looking for a way to turn the finances around and stay in business.
Despite the fact that, by many measures, the national economy is recovering nicely from the worst days of 2007 and 2008, on the local level in Escondido there are still many businesses that are struggling. During tough times many companies will scale back operations or draw upon cash reserves. But, for other companies, they are not in such a fortunate position when the finances take a turn for the worse. For these companies, filing for Chapter 11 bankruptcy may become a real possibility.
Being a business owner is not easy. Decisions need to be made every day that could impact the long-term viability of the operation. Profitability is always the main objective, but it can be hard to manage a profit when employees need to be taken care of, contracts need to be honored and customers need to be satisfied. For some businesses, the finances simply get out of hand at times. When that happens, filing for Chapter 11 bankruptcy may be a good option in a bad situation.
Many businesses in the Escondido area and throughout California did their best to get through the economic recession that hit the country several years ago. The recovery from those difficult times has been easier for some companies than it has been for others, however. Unfortunately, not every business has been able to remain profitable or get out from under overwhelming debt. For some companies it may be time to think about filing for Chapter 11 bankruptcy.