There are a few ways to tell if your company is going to crash (low revenue and high costs are one). While these might be overwhelming, bankruptcy is an option for many businesses that can serve as a light at the end of the tunnel. While things have been hard, you are far from out of options.
Here are some signs that bankruptcy could be the right choice for your company.
For businesses with a high amount of debt, it can be difficult to work out a plan for repayment. However, if you file for bankruptcy, you may not have to worry about debt collectors knocking on your front door.
Many companies choose to file for Chapter 7 or Chapter 11 bankruptcy to eliminate debt. Filing for Chapter 11 bankruptcy will not completely discharge your debts. It will allow you to restructure them and pay them back, often with a payment plan that does not include additional interest charges. You may be able to keep your property by filing for Chapter 11.
The Chapter 11 process is long. You can set a realistic timeline on how long it will take you to repay your debts, allowing you to keep your business above water. If your options are between closing shop and filing for bankruptcy, Chapter 11 might be for you.
Sharp Decrease in Business
If your business was going great, but the COVID-19 restrictions cut down your foot traffic, you may have experienced a hit to your bottom line. A large drop in business may signify a need for bankruptcy.
Choosing to file for Chapter 7 bankruptcy can help you get back to a good financial standing. While you will not be able to keep your assets (except in the case of some property), the majority of your debts will be forgiven. That can help you get back to where you were at before financially in a relatively short time frame.
One of the main requirements of Chapter 7 bankruptcy is that your family’s income must be equal to or less than the median family in your state. Otherwise, you may qualify for Chapter 7 if you pass the Means Test.
Going Into More Debt to Make Payroll
One of the major signs of a declining company is increasing your debt to pay your team. If you must take out loans or money from your personal account to make payroll, bankruptcy might be right for you.
Chapter 12 Bankruptcy
Let’s say that you have a family business within the farming or fishing industry. You may qualify for Chapter 12 bankruptcy, which may allow you to keep your assets but pay back a minor percentage of your debts. This can be more affordable than other types of bankruptcy, including Chapter 7, and allow you to keep your operation running.
To be eligible for Chapter 12 bankruptcy, you must be an employee or serve as a co-owner to your family farm or fishing operation. You must also bring in at least half of your income through that industry. If you are unclear on whether you meet the qualifications, give our law office a call, 509-380-9102.
Talk to a bankruptcy attorney
When it comes to your business, we know that you only want what is best for it. Consider filing for bankruptcy if your company is piling up debt with no signs of turning it around, and you need a moment to breathe. Bankruptcy may be just the solution you have been searching for during this challenging time. To discuss your options, schedule a no-obligation consultation today.