For a San Diego business that is considered a bankruptcy filing, there are options. First, if the company leaders believe that the businesses' financial situation can be turned around, a Chapter 11 bankruptcy can be the best option. In a Chapter 11 filing, the company is essentially looking for time - time to halt creditor collection efforts and provide the business with breathing room to submit a plan for reorganization, as well as an agreement with creditors on how to pay back debts.
Another option for a business is Chapter 7 bankruptcy, but this route is usually only used in the most dire of financial situations, in which there doesn't appear to be any hope of a turnaround to return to profitability. In this type of filing, just like in a personal bankruptcy, the company's asset are sold off and the profits are used to pay the company creditors, to the extent that is possible.
Whatever the option a company has under consideration, a recent article detailed some common mistakes that are made in the decision process:
•· Attempting to get out from under debt by selling off assets
•· Selling assets for less than fair market value
•· Making inside transfers
•· Incurring more debt just before filing for bankruptcy
•· Being less than honest when actually approaching the filing process
There are many things for the leaders of a company to consider before a bankruptcy filing, but among those considerations should be the careful steps to avoid the mistakes listed above. Business leaders are smart people, but sometimes even the best and brightest may get into a situation where they are outside of their comfort zone. When considering a bankruptcy filing, it is not usually the best time to test the bounds of comprehension. Getting the right information about business bankruptcy can make the difference between a return to profitability and shutting the company doors.
Source: Global Economic Intersection, "Top 5 Mistakes Business Make When Considering Bankruptcy," Tom Eldridge, September 2, 2012