To many Tennessee residents, nothing can seem more devastating than having to file for bankruptcy. However, bankruptcy no longer carries the stigma that it once did. Many individuals and companies have not only survived bankruptcy, but thrived from it. Entrepreneurs who are seeing their businesses quickly lose money may want to consider the benefits that a commercial bankruptcy can offer.
Business owners who are contemplating bankruptcy should know that they are not alone. Statistics from the American Bankruptcy institute reveal that more than 300,000 businesses sought bankruptcy protection from 2004-2010. Of the ones who filed for Chapter 7 or Chapter 11 bankruptcy, most - almost 70 percent - were able to keep their company with the help of reorganization or liquidate the business and start fresh.
Bankruptcy also allows a company to eliminate debt. Business owners can work with creditors to come up with feasible repayment plans. In some cases, the company can even continue its operations. The ability to find loans and lines of credit decreases, so business owners often use this opportunity to find creative ways to attract investors.
The good news is that bankruptcy is not a predictor of future financial struggles. There is no evidence showing that they are more apt to suffer financial issues again. In fact, business owners are unlikely to face bankruptcy a second time because they learned from their experience. Many avoid unsecured debt because of this.
Although a bankruptcy filing is a major decision, entrepreneurs should know that if they choose this path, there is light at the end of the tunnel. It's wise to exhaust all other options first, but not to wait too long. It's better to start the process early on, before debt gets too much out of control.
Source: FindLaw, "Bankruptcy Benefits for Struggling Small Businesses and Owners," Redman Ludwig, P.C., Aug. 8, 2011