Business Bankruptcy: Advantages and Disadvantages of Chapter 11
Going through bankruptcy is not a walk in the park. For businesses that are toying with the idea of filing for Chapter 11, knowing the different advantages and disadvantages can further help you in deciding. In business bankruptcy, keep your eyes wide open and determine whether the outcome outweighs the effects.
Advantages:
Filing for Chapter 11 can save you time. Since it will take months before the approval of a restructuring plan, it can buy you time from your creditors. I’m sure the few months of not being able to hear from you creditors can be heaven in itself. The more time you can postpone payments the more time you spend on making your money to work for you. Another advantage of Chapter 11 is that you deal with your creditors as a whole. It saves you the effort of having to explain to each and every creditor in your list. Plus you stick with a plan that has to be accepted by your creditors whether they like it or not. The power of the court’s decision is far greater than your creditors’ demand.
Disadvantages:
In order to file for bankruptcy, you’ll need a lawyer. Lawyer’s fee will cost you money. Most lawyers who handle business bankruptcy require upfront payments. The limited amount of money you have may prevent you from hiring good lawyers. Aside from costing you money, you lose some control on your business. You may be limited to performing day to day operations rather than controlling your business. Also, filing Chapter 11 can cause panic among your employees. It is not uncommon for employees to start searching for a more stable company.
