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Why Bankruptcy Can Actually Help Your Company

Lampley Law Office May 10, 2021

For most of history, bankruptcy has been associated with financial ruin. Although filing for bankruptcy may have negative consequences for your finances, it can also be beneficial for your Florida business. At a minimum, it will prevent the company from accumulating new debts that you might be personally liable for.

The Potential Benefits of A Chapter 11 Bankruptcy

There are several reasons why your company should consider Chapter 11 bankruptcy if it is struggling to stay afloat financially. For instance, you may be able to suspend debt payments to creditors for the duration of the proceeding. It may also be possible to renegotiate existing contracts with vendors or labor unions. This might free up the capital needed to order supplies, pay workers and otherwise continue running the company until it can start generating revenue on a consistent basis.

The Potential Benefits of A Chapter 7 Bankruptcy

If your business files for Chapter 7 bankruptcy, it will cease operations, which means that it will stop spending money. The company’s assets will be used to pay as much of its outstanding debt as possible. In the event that these assets are worth less than what the organization’s lenders are owed, the remaining balance will be forgiven. However, you may still be liable for any debts that you personally guaranteed.

Bankruptcy Can Provide Your Business with A Competitive Advantage

A reorganization bankruptcy may be able to provide your company with an advantage over its competitors. This is because its operating costs will be lower than others in your firm’s sector, which means that the business may be able to charge less for its products or services. Ultimately, it may be easier to attract new clients who will remain with the organization for years to come.

A bankruptcy attorney may provide more insight into the potential benefits of seeking protection from corporate creditors. If you have both personal and business debts, a legal adviser may be able to explain how to eliminate both in a Chapter 7 proceeding.