Bankruptcy’s Role in Saving a Company

When California business owners realize their business is struggling, they may feel like they have few options to save their company. Sometimes bankruptcy may the answer a company is looking for.

Some people may worry that they will be unable to keep their business if they file for bankruptcy. says that this usually depends on the kind of bankruptcy a business owner files for. People who file for Chapter 11 can typically keep their business up and running. This is because this type of bankruptcy includes a debt repayment plan. This debt is usually repaid with money the business makes as it continues to operate. If someone decides to file for Chapter 7, the ownership of the company generally determines whether the business remains open. People typically need to file a bankruptcy petition if they are a co-owner of a business. In this situation, the business may close because it is the company’s assets that are sold to repay this debt. If someone is the sole owner of a business, he or she can usually keep the company running because he or she can choose to file for personal bankruptcy.

People may sometimes think that bankruptcy is the last option they should consider. According to Intuit, bankruptcy can sometimes help a company gain more time to become financially stable. This is because a business is usually granted temporary protection from creditors. People may be able to delay their payments or pay a decreased amount each month. Sometimes creditors may also change the terms of a loan to assist the business.

In some situations, a company may be able to negotiate new contracts with the employees. Additionally, a business can sometimes retain its contracts with vendors. Some vendors may agree to charge less for supplies once they know a company has a structured bankruptcy reorganization.

Related Posts
  • Can Businesses Benefit from Subchapter 5 in Chapter 11 Bankruptcy? Read More
  • Subchapter V of the Bankruptcy Code Read More
  • Does Business Bankruptcy Affect My Credit? Read More