Businesses that file Chapter 11 bankruptcy may actually be doing the best thing to save their business in the long run. For a business in trouble, filing Chapter 11 bankruptcy can mean:
Access to new capital. If a small business still has a viable market and business plan, there are lenders that will invest in a Chapter 11 bankruptcy business, which allows the business to continue operations as it restructures its debt.
Halting creditors’ seizure of assets. When a business is in Chapter 11 bankruptcy, creditors are not allowed to pursue collections against the company. This provides the necessary protection for the business to continue to utilize its assets and continue to do business.
Time to restructure. Businesses in trouble need time to figure things out. Chapter 11 bankruptcy provides this necessary “breathing room” for businesses to reexamine their operations and restructure for the future without the distraction of legal threats from creditors.
Before filing business bankruptcy, there are several things you should NOT do, including:
- Don’t make preferential payments to creditors
- Don’t borrow from family or friends unless they can afford to lose it
- Don’t pay yourself a bonus or back pay
- Don’t take equipment or supplies from your LLC or corporation
- Don’t take cash advances on a company credit card
- Don’t pay all your unsecured debt
In a majority of Chapter 11 cases, there is no trustee appointed unless the court finds evidence of fraud, incompetence or mismanagement. The business continues to operate as usual, but cannot make major decisions without the approval of the bankruptcy court (i.e., selling assets, entering into lease agreements, making large operational changes, etc.).
To effectively navigate the Chapter 11 process, you will need the help of an experienced business bankruptcy attorney. Johnson Legal PC offers effective valued solutions along with exceptional legal expertise and creative thinking for New Jersey and New York businesses. Contact us to learn more about how a great corporate attorney can help your business thrive.