If your business is in financial trouble, one of your options is to enter into a business bankruptcy. As with any kind of bankruptcy, a business bankruptcy has benefits and downsides.
There are a few kinds of bankruptcy you might want to look into. One, Chapter 7, signifies the end of your business as you liquidate your assets. Chapter 11 gives you a chance to reorganize your business, so you can continue operating in the future. Other forms also exist depending on the kind of business you run, but these are the two primary types most business owners look into.
How do you decide which bankruptcy is right for you?
The first thing to do is to think about if you want to keep your business open. If not, then Chapter 7 might be wise, since it liquidates assets to pay off debts. Remaining debts are forgiven after all assets are liquidated.
If you can't imagine closing the business's doors, then Chapter 11 might be a better option. In Chapter 11, you'll be able to restructure the business, rebuilding it from the ground up to use its finances in a more appropriate way. This could include downsizing, renegotiating contracts and managing mortgages or other expenses.
Are there alternatives to a business bankruptcy?
It depends on how far gone the business's finances are. If the business still has assets and some income, then creating new marketing plans or updating the facility might be enough to give it new life. Renegotiating contracts and terms with lenders could also help, depending on the circumstances.