Should I File For Bankruptcy or Shut the Business Down?
Filing for business bankruptcy of any kind is an extremely serious step. For that reason, you, and if necessary the company’s officers and directors should weigh all relevant factors before you decide to attempt to save your business by filing for Chapter 11 protection, or begin the process of shutting it down by filing a Chapter 7. Here are a few thoughts, but hardly an exhaustive list, on when to consider each option.
In general, businesses file for Chapter 11 because they have solid reasons to believe the company can recover and eventually become a profit making entity once again. Generally, there are various types of indications that will go into shaping this perception. There may have been a temporary setback. A strike, a spike in interest rates for a rate-sensitive enterprise, etc. Of, for example, if the company is launching a new product that has a good chance of capturing a great deal of new business for your company, you may want to go with a debt reorganization plan. This effectively buys you time to stay in operation while you launch and promote the product.
However, if your product line is well on the way to being obsolete, or your particular market is congested with products that you cannot compete with, it may be time to shut the company down and find something else to do. When this is the case, filing Chapter 7 will allow you to settle things with your creditors, and move one step closer to closing the company. While regrettable, this approach does prevent you from losing more money than you already have, and also allows your creditors to focus their energies on other matters.
When making a decision about whether to file for bankruptcy or shut the company down, don’t rely just on your own hopes and perceptions. Seek the input of experts who do not have a vested interest in your company one way or the other. Often, outsiders can provide data and a sense of perspective that is difficult for you to achieve. Only when you have weighed all the available information should you make your final decision.
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