Chapter 11 Bankrupsy

Need help with chapter 11 bankrupsy? Here are 3 factors you must know.

If your business is facing hard times,Chapter 11 bankrupsy is a method of claiming bankrupsy which allows you to keep control of your company. With Chapter 11, you can often pull your business out of hard times.

Why Chapter 11 Bankrupsy?

The law and the government recognize that you have put much more into your business that what somebody else would pay for its parts.

For example, you spent hours designing a logo and making changes, to get it just right. However, a logo is not worth anything without your company remaining a going concern. You can't sell it separate from the business. This also applies to other business assets, such as training invested in your staff or managers. You can't resell this, either. That is, you can’t pull it out of a person’s mind and give it to somebody else for a small fee.

Many business owners think that Chapter 11 is the shining star that will lead their business from the dark - but it's not so simple.

What is Chapter 11 Bankrupsy?

Chapter 11 bankrupsy is a way of stopping your creditors from harassing you without liquidating the company to repay debts. This sounds great, but there are catches -- the main one is that you'll need a bankrupsy attorney and it's going to cost you a bundle.

Here's why this is bad.

In Chapter 11 bankrupsy, a court will supervise reorganizing your company’s debtsl. The court can often provide relief from part or all of your debts, so you can make a fresh start. You have to weigh this benefit against that fact that if you are a small company, a bankrupsy attorney will cost you at least $50,000. If your company is larger, attorney's fees will cost you and your business anywhere between $50,000 and $100,000 and I've seen up to $1million for a medium sized firm.

You know what's worse?

Your bankrupsy attorney will give you no practical advice about how to change the way you run your business which almost certainly means your business will face trouble again after your high cost bankrupsy is over. In fact, without being too cynical, it would benefit the attorney if another business downturn occurred for you, because they would another fee off you and your business.

Why Not Go To Court?

Other than the costs, there are other reasons to not file.

Going to court for a bankrupsy case is risky business. While you may file for chapter 11 bankrupsy, if your creditors are argumentative enough, they may convince the court to change the proceedings to a chapter 7 bankrupsy hearing. This is especially probable if your attorney is draining all of the company's cash reserves. Under Chapter 7, it forces your company to liquidate – the most severe scenario.

The other bad possibility is the court appoints a trustee to run your business, if for some small reason, the court considers that you cannot do this yourself. You need to weigh up the possible benefits of filing a chapter 11 bankrupsy claim against the definite costs (attorney’s fees) and the possible downsides (you may have to liquidate and lose control of your company anyway).

How to avoid bankrupsy and business failure.