Kansas City Bankruptcy Lawyers Explain an Alternative Option
Chapter 11 bankruptcy is a great way to maintain a business and keep it afloat while restructuring debt; however, there is an alternative to bankruptcy. This is known as a “business workout” and it involves making a plan to settle your debts with creditors. Unlike bankruptcy, there is no court proceeding involved, only negotiation between your attorney and the creditors.
Would My Business Benefit from a Workout?
A business workout will not be for everyone. Businesses have the best chance of a successful workout if they only have one or two large creditors knocking at their door. This might be an outstanding IRS bill, a line of credit from a bank or a secured creditor who financed a piece of machinery. Do not ignore falling behind on payments or try to “borrow from Peter to pay Paul.” The sooner you act to remedy the credit problem, the more options you will have.
An attorney who has experience in business bankruptcy will be your greatest ally. Before any creditors are contacted, the business owner can work closely with the lawyer to structure a proposed repayment plan based on future financial statements. To be thorough, the owner should project the plans three to five years into the future.
How Can a Business Negotiate with Creditors?
You and your attorney can work with creditors to demonstrate your plan is feasible. Although the creditor does not have to agree to anything, a business does have some leverage. Most secured creditors would rather collect money than have to repossess the collateral. Similarly, most unsecured creditors would rather get their money than have to file a lawsuit in court and collect. A repayment plan offer is a good faith attempt by the debtor to benefit the creditors.
A debtor is not completely without leverage in a business workout. If Chapter 7 or Chapter 11 bankruptcy is the alternative to agreeing to the workout, the creditors know that a bankruptcy filing will take time and completely stop their collection activities. Further, creditors know that in a bankruptcy proceeding, they typically do not get paid the full amount they are owed. Therefore, the reality of bankruptcy looming can push creditors to negotiate with the debtor and come to a mutually beneficial agreement.
Where Can I Find a Business Bankruptcy Attorney for Business Workouts?
Our bankruptcy attorneys in Kansas City have devoted their lives to helping business owners get out of financial trouble. If you are struggling to keep your business afloat, do not wait to contact our bankruptcy lawyers today. The sooner you call us, the more options you will have to work out your debts and get the business back in the black.