Bankruptcy has garnered a rather negative reputation, for businesses and individual filers alike. However, the fact of the matter is that bankruptcy can serve as an excellent solution to financial troubles. In fact, a Chapter 11 bankruptcy can often be very positive for a company facing financial struggles.
Chapter 11 bankruptcy gives a business the chance to reorganize its operations, an opportunity which it might not have otherwise had. If a business is struggling financially, the reorganization was likely overdue. A Chapter 11 bankruptcy provides a business the opportunity to evaluate all departments and determine how to best increase efficiency and sales. Efficiency is also increased in the sense that the business in question has a clear competitive advantage over companies because it has restructured its debt obligations.
Opportunity to Renegotiate Contracts
Chapter 11 bankruptcy presents companies with the chance to reevaluate and reject contracts. As the business embarks on its reorganization, cumbersome contracts can be rejected, which effectively means terminated. Because suppliers, unions, and other entities may fear rejection of their contracts, the debtor is in a strong position to renegotiate contracts to more favorable terms .
Ability to Repay or Escape Debts
Of course, the biggest benefit to a business in filing for Chapter 11 bankruptcy lies in its ability to defer debt repayment and even escape a percentage of its debt obligations. With a Chapter 11 bankruptcy, debt payments may be temporarily stayed, while the debtor proposes a plan of reorganization where it is only paying a portion of its debt obligation.
Ultimately, the benefits of filing for a Chapter 11 bankruptcy will depend on the specifics of the company’s business operations. If you’re interested in discussing whether Chapter 11 bankruptcy can help your business’s financial struggles, give our office a call to speak with a West Palm Beach bankruptcy attorney today.