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Things to consider before pursuing Chapter 11 bankruptcy

Financial woes strike most businesses at one time or another. Sometimes, these money troubles threaten to shut a business down. However, such drastic measures aren't always necessary, as businesses can find debt relief options that allow them to continue operation.

While many people think of bankruptcy a sign of failure, that isn't the truth. The truth is that bankruptcy, whether in the personal or professional world, is a way to escape cumbersome debt and obtain a fresh financial start. In fact, many businesses have sought bankruptcy protection and lived to tell the story. Three major airlines have filed for bankruptcy in the past 20 years, yet their operations continue to surge forward.

How do they do this? Usually, these companies seek Chapter 11 bankruptcy protection. Through a Chapter 11 bankruptcy filing, a business is able to restructure its debt to obtain more manageable payments. This, in turn, makes it more likely that a business is able to pay off its debts. This differs from a Chapter 7 business bankruptcy whereby the business is closed down and liquidated to pay creditors.

When deciding whether to pursue Chapter 11 bankruptcy, a business must take many things into consideration. For example, if the value of liquidating a business is worth more than keeping it operating, then Chapter 7 may be more appropriate. Also, a business should consider whether it has a reason to remain in operations. If its market share has been gobbled up by competitors, including online retailers, then Chapter 11 may be a fruitless endeavor.

There are many debt relief options available to businesses. Depending on the circumstances at hand, Chapter 11 may be appropriate. To learn more about this process and better determine if it is appropriate under a particular situation, businesses should sit down with an attorney who is experienced in this area of the law.

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