Sometimes, it is very difficult for a business owner to sustain operations if the business is making continual losses. During such times, many business owners here in Texas choose to close the business and move ahead. However, the experience of losing the business can be heart wrenching. Therefore, it may be a wise decision in such a situation to choose business reorganization under the guidelines of Chapter 11 of the United States Bankruptcy Code.
There are some significant advantages to a Chapter 11 bankruptcy reorganization but whether its suits a business owner's requirements or not must first be established. It may be a wise decision to file for Chapter 11 bankruptcy but only after a business owner understands the process thoroughly.
For example, the first step for a business owner is to understand if it is possible to continue running the business. In order to understand that, a business owner should assess the current leadership and its ability to steer the business toward profitability. If a business owner sees that it is possible, the person may decide to continue to operate the business; however, if that is not the case, the business owner should look at other options, including Chapter 11 reorganization bankruptcy.
If a business owner weighs his or her situation and decides to proceed with Chapter 11 bankruptcy, it is important to determine if all or some of the business's debts are owner or cosigner guaranteed. That is a very important step because in a Chapter 11 bankruptcy filing, the business continues to operate but creditors are required to stop debt collection activities against the business's guarantors and cosigners.
A business owner should also remember that, in the event of business bankruptcy, creditors and the courts have a major say in how the business operates, which can put some serious restrictions on the business owner's independence. To make matters more complicated, that business owner must also comply with all court orders and seek the court's approval for any business matter that is out of the norm.
Source: FindLaw.com, "Ten Things to Think About Before Filing for Bankruptcy," Accessed on Jan. 27, 2015