When individuals are struggling to pay off an overwhelming amount of debt, declaring bankruptcy can help them regain their financial footing. When businesses are struggling to pay back lenders, on the other hand, closing up shop may seem like the only option. Depending on the circumstances, though, declaring bankruptcy could actually save the company. 

What Does Business Bankruptcy Entail?

When it comes to business bankruptcy, Chapter 7 essentially liquidates the company, but 11 and 13 can provide the time needed to catch up on past due bills and become profitable. Chapter 11 may be wise for those who face the potential of losing their business to creditors; this approach essentially allows you to reorganize your debt by implementing a manageable plan in which you pay back creditors over time while remaining operational. Chapter 13 is similar in that it reorganizes debt; however, the proceedings are much simpler, making it ideal for sole proprietors who earn a regular income and want to pay back their debts within three to five years. 

When Is Business Bankruptcy the Right Move?

Declaring Chapter 11 or 13 bankruptcy may be the right move if your business has the potential for long-term profitability. You also need to have cash flow in the short term because once the proceedings are complete and the debt has been reorganized, you must make regular payments. Additionally, business bankruptcy may be a wise financial strategy if the company’s assets are valued at more than its liabilities. In such a scenario, the business is probably worth saving. Likewise, if you are personally liable for the company’s debts, keeping it afloat could protect your personal financial security by preventing creditors from seizing nonbusiness assets. 

If your company is struggling and you think bankruptcy could be the answer, turn to O’Connor, Mikita & Davidson. Located in Cincinnati, OH, this firm helps both individuals and businesses secure the breathing room they need to catch up financially, so they can go on to thrive. They also assist clients with family, estate planning, criminal, personal injury, and civil law proceedings. To explore their legal fees, visit their website. When you’re ready to discuss your situation, call (513) 793-5297.