In many cases only about half of businesses who need to file bankruptcy actually go ahead and file Chapter 11 bankruptcy. At a time when businesses are facing more economic troubles than ever, why is that so many choose to forgo the benefits of bankruptcy? Well mostly because perceived challenges either real or imagined.
Some challenges and how businesses can overcome them:
- Confusion About Bankruptcy. Many businesses are confused about if and how Chapter 11 bankruptcy can benefit their company. As with personal bankruptcy, corporate bankruptcy is shrouded in myths that seem to crop up again and again, especially during a recession. If a business owner is confused about how bankruptcy works or how it can benefit their company, scheduling a consultation with a bankruptcy attorney is probably the best option. Speaking with a bankruptcy attorney about your company’s specific circumstances will help you find out how bankruptcy might improve your company’s chances of surviving during hard times.
- Fear Of A Creditor Backlash. Many corporate debtors who don’t understand bankruptcy may fear a creditor backlash if they choose to file Chapter 11 bankruptcy. While there may be some creditors who will be upset by a bankruptcy filing especially if they are an unsecured creditor, the truth is that many creditors will get paid more during bankruptcy than if a company just allowed their debt situation to devolve into chaos with numerous lawsuits being launched against them and the resulting judgments and asset seizures associated with those lawsuits. Bankruptcy allows the most orderly and fair repayment to creditors when a company is insolvent.
- Bankruptcy Costs. Many corporate debtors fear the costs associated with Chapter 11 bankruptcy and hesitate to even inquire about filing bankruptcy because of this fear. But the truth is that some investors are willing to finance companies with debtor-in-possession loans that will help them survive bankruptcy and emerge a stronger company.