Business Bankruptcy Liquidation

Thousands of corporations file for business bankruptcy liquidation each month. Some give up entirely and file for Chapter 7 bankruptcy, in which the business is effectively ended and assets are sold to repay creditors. Others attempt to file for Chapter 11 bankruptcy, where an effort is made to reorganize an ailing organization so that creditors may be repaid and the corporation returned to profitability. Under Chapter 11 filings, committees are appointed to attempt to assist with a business plan which will reverse downward trends and maximize returns to creditors. At times, even this process fails and the business is reduced to calling upon the services of asset liquidation companies. Many topics must be considered when a business is in this situation. Comfort may be taken in the following thoughts from Proverbs 37:23-24 -- The steps of a good man are ordered by the Lord: and he delighteth in his way. Though he fall, he shall not be utterly cast down: for the Lord upholdeth him with his hand.

At least in the beginning of such considerations, an owner may be wondering whether or not a person can avoid bankruptcy by his/her own efforts. If the debt is not too significant, perhaps a solution can be worked out. A realistic budget of expenditures must be constructed to understand exactly the circumstances the corporation is facing. Certain questions must be weighed, such as whether expenses can be reduced or income increased by other means. Are there items which may be sold by the owner or with the help of asset liquidation companies? A further consideration may be whether one has the time and energy to try to renegotiate debts with creditors oneself, in the hopes that they would rather steadily receive a smaller payment on their investment than get involved with the time and money issues which bankruptcy procedures would require. Finally, can the debt be repaid in a reasonable amount of time?

Bankruptcy procedures are complicated and it is usually advisable to retain a knowledgeable attorney who has specific experience in this area. After all, significant assets may be riding upon the outcome of these choices. It would also be wise not to take out equity loans which could endanger personal assets such as a home. Most states provide that under business bankruptcy liquidation, a certain percentage of one's home equity is kept from being available to creditors. However, if a person of his own accord takes an equity loan upon himself, there is no such protection.

Conscientious employers may take note that certain retirement benefits are exempt from creditors. Check the Internal Revenue Code for details. Pension rollovers to an IRA up to 1 million dollars are usually protected. At times, such protection may even be increased by bankruptcy courts. One other item to take note of when conducting business affairs under the pressure of impending business bankruptcy liquidation is that an employer should not cease making premium payments to health insurance plans. Aside from continuing to pay premiums for ethical reasons, by specifying that a certain percentage of an employee's salary will be put aside for these premiums, one could become liable to lawsuits if such an agreement is not honored.

Business debt counseling may be an alternative one can pursue. Be sure that the firm is reputable, though, because some services may be far more interested in their own financial future than that of their clients. A recognized service may be able to help with budgeting and renegotiation of debts. Creditors are more likely to stop harassing phone calls and threats of legal action if they have some prospect of repayment. More time can then be devoted to running the business. Needless to say, a counseling organization should be able to clearly explain in written form the exact terms, interest rates and special fees which may apply to the specific situation.

In some cases, turning to asset liquidation companies may provide relief. A reliable company will have expertise in prevailing market conditions, and will be able to give advice for strategies the corporation can use to avoid business bankruptcy liquidation being imposed by a bankruptcy court. They will likely have connections with potential buyers of excess inventory. Also, they may be enlisted to deal with sales tax and other legal issues, thus freeing a company owner to utilize the time to improve a corporation's financial situation. Certain asset liquidation companies may provide for security issues, such as removing sensitive information from company equipment. Some may also be willing to become involved with the disposal of equipment according to environmental or hazardous waste guidelines, or even arrange for such items to be donated to non-profit or charitable organizations.

The final question as to whether a proposed plan will probably help a business or not is a decision that can only be made by the corporation's owner. Individual factors are involved in deciding which course of action should be pursued. If it is decided that filing for bankruptcy is the best choice, the advice of a lawyer is recommended because several options are generally available. Each has its advantages and drawbacks; there is no 'one size fits all' solution. One thing to consider is which debts will be discharged by each type of business bankruptcy liquidation. Sometimes a combination of filings may be in order. In this case, care must be exercised to plan around the restrictions involved in filing for a particular type of insolvency. In certain cases, a number of years must elapse before one is able to file again.

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