Chapter 11 bankruptcy is specifically designed to allow companies to stay in business and reorganize their finances. Filing for bankruptcy can be more than a lifesaver. It can also be a strategic business decision. Let’s look at some of the benefits of filing for Chapter 11 bankruptcy.

Relief from Creditors

An automatic stay is usually imposed after a Chapter 11 bankruptcy has been filed. You will be allowed to plan your finances and not have to deal aggressively with collectors. Filing bankruptcy can also help you get rid of any unsecured debts you are unable to repay.

Temporary relief can also be obtained from lawsuits, wage garnishments, and repossessions. Although your creditors may have some influence over your repayment plans, it is likely that you will only pay a portion of the total debt.

You Have the Ability to Renegotiate Certain Contracts

Bankruptcy allows you to renegotiate any contracts that you are currently unable to honor. These can be with vendors, service providers, or labor unions. They are often incentivized and paid to meet you in the middle. They will likely benefit financially if your business continues to exist for many years.

Obtaining Emergency Funding

Chapter 11 is a priority for the reorganization and financing of your company. You could get access to DIP (debtor-in-possession) financing. This is a unique situation in which the lender must be approved by the bankruptcy court and also receives additional protection.

Second Chance With a Competitive Edge

The greatest benefit to your business is its preservation. Your business reputation will be maintained and your employees will continue to get paid.

Bankruptcy is more than a survival strategy. It is designed to help you get back on your feet and do so in a sustainable manner. You won’t have to file for bankruptcy. However, you will be able to pay a portion of your debts with relief from some external pressures.

This post was written by Trey Wright, a chapter 13 lawyer in Tallahassee with extensive experience! Trey is one of the founding partners of Bruner Wright, P.A. Attorneys at Law, which specializes in areas related to bankruptcy law, estate planning, and business litigation.

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