To many people, a business bankruptcy is synonymous with business failure. They assume that their Harrisburg, Pennsylvania companies must cease operating and close their doors to secure the financial relief provided by a bankruptcy filing.
Thankfully, that is not necessarily the case. Chapter 11 bankruptcy is often a solution for companies experiencing a temporary downturn or short-term economic issues to prevent aggressive collection activity, reduce their total debt and get the business back on track. It serves as a reset button during times of unexpected financial hardship.
For those who have business debts and recurring expenses that outweigh current revenue or other challenges that put their company at risk, a timely Chapter 11 bankruptcy could potentially help them take control of their debts and get the company back on track.
How Chapter 11 can help business owners regain control
Those running companies in Harrisburg might fall behind on their financial obligations after an illness forces them to halt operations or an uptick in material costs diminishes their profit margins. Chapter 11 bankruptcy staves off collection efforts, including creditor lawsuits and vehicle or machinery repossession efforts.
When a business owner files for Chapter 11 bankruptcy, the courts grant them an automatic stay. Creditors must temporarily stop trying to collect on the organization’s debt until the courts resolve the bankruptcy filing. Certain debts may be eligible for discharge, including non-priority, unsecured debts, such as business credit card balances.
Chapter 11 bankruptcy allows for the reorganization of the company. Instead of liquidating assets and closing down, Harrisburg business owners can close unprofitable locations, renegotiate financial obligations and take other steps to make the company profitable again.
When successful, Chapter 11 bankruptcies allow people to protect their businesses and their reputations with vendors, lenders and other creditors. The process is relatively complex, especially when compared with the Chapter 7 bankruptcy process associated with asset liquidation and company dissolution.
Experienced legal guidance is important for a successful Chapter 11 filing. Discussing current business challenges and long-term goals with an experienced bankruptcy attorney can help struggling local business owners take control of their finances and get their companies back out of the red.