No one ever really anticipates getting mired in debt in their business. Whether through outside circumstances or business decisions that didn’t quite work out, it happens.
Lots of Sacramento business owners find themselves in a difficult place right now trying to figure out a way to salvage their businesses despite burgeoning debt. Even big names like Sears, Pier One, and Bed Bath & Beyond have fallen to great financial pressures.
If that’s you, you’re not alone. And also, there might be a way forward that you never expected: Chapter 11 bankruptcy.
Today I want to get into who this option is for and answer some basic questions to help you know if you should pursue it. Next time, I’ll touch on the benefits and drawbacks, so stay tuned for that.
And, even if you don’t take this route, it pays to know what your options are.
Embracing a fresh start
To be clear, bankruptcy isn’t some kind of magic wand you can wave and make the problems disappear. It comes as an option only when you’ve exhausted every other avenue to resolve your financial challenges.
But also… bankruptcy is not an admission of defeat either. Look at it more like a strategic decision to regain control of your Sacramento business’s future.
Taking this route opens the door to a structured and supervised process that can help you reorganize your debts, renegotiate contracts, and create a sustainable financial foundation for your business.
Who’s right for it?
So, what you might be asking is: Who makes the ideal candidate for Chapter 11 bankruptcy filing… and is that you?
Usually, people that find themselves in this spot have fallen prey to a catastrophic event that serves as a catalyst to major financial strain. It can also be because a business owner failed to keep up with taxes or didn’t handle them properly (naturally, I have thoughts on this and would be happy to sit down and discuss how to set you up for success in this). Sometimes a business owner is in bank default and can’t get the bank to work with them. Whatever the situation, there isn’t a way forward that’s easy to see.
Again, Chapter 11 isn’t just for getting out of a hot financial mess. It’s designed for businesses that still have a viable future. It’s an opportunity to re-lay a stronger foundation so that you can do some of the following to build a healthy business:
- Rejecting agreements that aren’t profitable
- Selling off assets to raise funds to pay back creditors
- Receiving a cash infusion to pay general creditors
- Streamlining the balance sheet
- Getting a change in interest rates
- Securing relationships with vendors
Remember, every situation is unique, and seeking guidance from a qualified bankruptcy attorney who specializes in Chapter 11 cases is a must.
Before you talk to someone though, let’s address some of the most common questions that come up to help further shine some light on bankruptcy as a relief valve. That way you can get some clarity and make an informed decision:
What is Chapter 11 bankruptcy, and how does it work?
Chapter 11 bankruptcy is a legal process that allows businesses to reorganize their debts and operations while maintaining control of their business. It provides an opportunity to develop a plan to repay creditors and create a path toward financial stability.
Will filing for Chapter 11 bankruptcy mean the end of my business?
Not necessarily. Rather, it offers a chance to restructure and rebuild, so you can emerge stronger and more resilient.
How long does the bankruptcy process take?
It varies depending on the complexity of your case. It can range from several months to several years. However, during the process, you can continue operating your business and work towards a successful reorganization.
What happens to my debts in Chapter 11 bankruptcy?
Your debts are restructured through a court-approved plan, which may involve reducing the total amount owed, modifying interest rates, or extending repayment periods. The goal is to create a manageable plan that aligns with your business’s financial capabilities.
Will I lose control of my business?
While the bankruptcy court oversees the Chapter 11 process, you will retain control of your day-to-day business operations. Major decisions may require court approval, but you will work closely with professionals to ensure compliance.
After 2020, you and I both know firsthand how the unexpected can turn the world upside down and put even the best Sacramento businesses in the proverbial rock and a hard place financially. It can happen to anyone, and seeking a solution is a sign of resilience, not failure.
While you’ll want to (as I mentioned above) talk to a bankruptcy lawyer that specializes in Chapter 11 filings if you want to pursue this, I can be here to advise you (especially as relating to tax debt) and support you in the process.
My calendar is open to you: sacramentotaxresolution.com/schedule-an-appointment/
Here for you,