Essential factors to know when considering company bankruptcy
When a company is in dire straits, often a company bankruptcy seems
enticing. Your debt will disappear, and, if the company has filed
under Chapter 11 bankruptcy, the “fresh start” offered
by the reorganization is hard to pass up.
Good Reasons Why Company Bankruptcy Not Always Best Solution
But filing a company bankruptcy isn’t always the best answer.
For some companies, it could be the wrong answer, while for others,
there might be better options. Here are some reasons filing company
bankruptcy isn’t always the best choice.
1. You could lose much of the control over your company. Many executives
believe the bankruptcy laws allow them to control their company's
activities during a Chapter 11 company bankruptcy. But this is misleading.
Bankruptcy experts say business owners must understand that other
individuals will oversee and direct their decisions during a company
bankruptcy. Some of these people include debtors, shareholders, and
the court trustees.
2. Company bankruptcy is expensive. Depending on the size of your
debt, it might be more expensive to file bankruptcy than to continue
to run your business and try to save it. If you choose to file company
bankruptcy, you’ll have to hire good counsel, and often other
professionals who will charge a hefty fee for their services. The
cost of filing bankruptcy often surprises business owners so consider
these costs before you choose company bankruptcy as your best alternative.
3. Company bankruptcy can take more time than you expect. This process
isn’t a quick. You don’t file bankruptcy, see a quick
turnaround of your fortune, complete the bankruptcy and return to
business as usual. Depending on your jurisdiction, court may only
hold hearings once a month. Sometimes, the court may delay these
hearings that are essential to the day-to-day running of your business.
This will slow down the whole course of the company bankruptcy. If
you choose to file a company bankruptcy, understand that this process
involves have a series of “sit down and wait” moments
for you.
4. Your employees might flee during the bankruptcy process. Even
if the company bankruptcy filing is a Chapter 11, or reorganization,
many employees might mistakenly believe the company is in such dire
straits as their job is in danger. Even if you reassure your employees,
you are sure to lose a few or more as people seek more stable employment
elsewhere. During this already difficult time, you’ll have
to hire more employees, or make do with fewer people if hiring new
employees is not possible. If you do hire more people, consider the
cost of hiring, training and “breaking in” new workers.
Secrets
of saving your company from bankruptcy
|