Bankruptcy has never been a pleasant topic to discuss. Whether it’s a personal or business matter, filing a petition for bankruptcy is inherently a sad state of affairs for everyone involved. However, when you really come to think about it, looking for a legal expert such as Sasser Law Firm’ bankruptcy attorney Raleigh NC and commissioning their services can be a good thing.
Depending on the type of bankruptcy and the reasons behind the financial woes, bankruptcy can be something a business should delight in. For one, a bankruptcy can provide the business with a room to breathe so that they reorganize and draft a working plan to move forward profitably. Aside from that, it can also stop the bleeding that might lead to the garnishment of all the assets of the business or piercing the veil of corporate entities.
What are the different types of bankruptcies?
When a certain business is faced with insurmountable financial burdens, it can, as a matter of right, file a petition in court for several kinds of bankruptcy. The two most common types of bankruptcy petition that get filed is either under Chapter 7 or Chapter 11. Under the former chapter, the business is liquidated. The financial obligations that cannot be met as well as debts that cannot be paid are discharged. In the latter, some of the obligations of the business are temporarily suspended pending their reorganization.
A bankruptcy filed under Chapter 7 allows the business to start over under a new business name. It will no longer bear the obligations of the previous business that closed down due to bankruptcy. On the other hand, a bankruptcy petition filed under Chapter 11 allows the business to stop its own downward slide and save its operation and assets.
Bankruptcy suspends repayment of debts contracted by the business
One of the main advantages of filing a petition for bankruptcy is you will no longer have to burden your business with your old obligations. It’s like turning over a new leaf. However, if you file one under Chapter 11, you will need to pay such obligations but only after you have ample time to reorganize and repay the same.
Here, your creditors will be forming a committee that will provide them with access to your reorganization plan. The said committee will also have the right to share such information to the judge presiding over your bankruptcy proceeding. Your business’s reorganization plan should include proposals to pay your creditors a certain percentage of what you owe them. In certain cases, your creditors will have to agree to this set-up to help your company survive. Your creditors will vote on your reorganization plan, but the judge will have the final say on its approval.
Renegotiation of contracts
If your business has existing contracts with other businesses, individuals, and labor unions, it can end these existing contracts and renegotiate for better terms under a Chapter 11 bankruptcy. Most of the suppliers, vendors, and unions are in favor of this approach because it means your business won’t close down. You will still be requiring services and supplies later on. You will also be offering jobs once the reorganization plan is in motion.
In case a labor union is involved, the labor union management will be the one to take the proposal for a new contract to its members for voting. They will also give recommendations to their members whether or not it’ll be beneficial for them to accept the new contract. In their recommendation, the labor union management will take into account the company’s reorganization plan and the current financial situation.
These are just a few of the benefits a business can take advantage of when filing for a petition for bankruptcy. Aside from these, the business can also have more time to plan its reorganization and new operation process. If executed properly and if guided by a reliable and efficient bankruptcy lawyer, your business can maximize its benefits from its own bankruptcy. and draft a working plan to move forward profitably. Aside from that, it can also stop the bleeding that might lead to the garnishment of all the assets of the business or piercing the veil of corporate entities.