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.
First, there is the fundamental and essential question: is filing for bankruptcy truly necessary? Have all other options been explored? Have potential financial changes been discussed and implemented? Filing for bankruptcy will probably set a company on an irreversible path - company leaders should be sure that this path is absolutely necessary.
Next, what type of help and advice will be necessary to actually proceed through the bankruptcy legal process? Filing for bankruptcy can be a complicated legal matter, and business owners will need to be sure they are receiving the best and most accurate advice on how to proceed.
If the decision to file bankruptcy is the right one, there is the immediate next question: what type of bankruptcy filing should be pursued? In a Chapter 7 bankruptcy, the company will liquidate assets and shut down. But, if major - yet achievable - changes can be made to return the company to a path toward profitability, Chapter 11 bankruptcy may be the choice. In Part II of this series, we will continue to examine a number of other factors to consider before filing for a business bankruptcy.
Source: FindLaw, "Ten Things to Think About Before Filing for Bankruptcy," Accessed Oct. 17, 2015