Sometimes, companies fall on hard times and end up with large amounts of debt. However, that does not always signal the end. Bankruptcy can help a company restructure its business and create long-term goals. That is what Tennessee medical transcription company M*Modal is hoping to accomplish after filing for Chapter 11 bankruptcy.
Chapter 11 bankruptcy is used mostly by large companies, but some smaller businesses may find this type of business bankruptcy useful. It helps companies with huge debt to find ways to become profitable again. These steps may include finding ways to increase revenue or cut costs through methods such as employee layoffs or doing away with non-profitable departments.
M*Modal, which was bought by One Equity Partners in 2012, filed for bankruptcy on March 20. The company has cash on hand to continue operating as usual during the bankruptcy proceedings and is currently communicating its strategies with bondholders and lenders. M*Modal plans to use the bankruptcy protection to assess the market and adapt accordingly, positioning itself for long-term growth and success.
In a Chapter 11 bankruptcy, the goal is for the company to restructure itself in order to become profitable. This involves not only coming up with a solid plan to cut costs, but also working with lenders to pay off debts or at least negotiate with them. Some debts may even be discharged. Creditors will often work with companies so they can receive at least some of the debt owed to them.
Acquiring massive debt does not necessarily need to be the end for a company. A proper plan of action, assisted by an experienced business attorney, can help companies explore all avenues for reducing debt and cutting costs, hopefully leading to a profitable future.
Source: The Tennessean, “M*Modal files for bankruptcy protection,” Shelley DuBois, March 20, 2014
