The Tale Of Chapters 7 & 11? Don’t File For Bankruptcy

It seems that everyone knows about chapter 7 and chapter 11 bankruptcy clauses these days. After all, they appear to be legitimate ways to get out of a tight hole. Chapter 7 is particularly appealing because it deals with unsecured debts. So, it’s no surprise that bankruptcy filings have increased in the past five years. In fact, it might make you, a legitimate business owner, want to take the easier way out. Although there are pros and cons of bankruptcy, the negatives often outweigh the positives.

Here are the four reasons why a business should never file for bankruptcy.

It’s The Last Resort

Although modern companies see it as a get out of jail free card, the opposite is true. Filing for chapter 7 or 11 is the last resort when a business has no other options. Up until that point, there is a lot the leader of the company can do to deal with the debts. For example, a payment plan or a settlement is a viable option. Once you choose a program with the help of, the business can pay the money back incrementally. Even for firms with little cash reserves, the amounts are affordable.

Obliterates Credit Rating

The main reason to avoid filing at all costs is the company’s credit score. As soon as the process goes through, the banks know that you are not a trustworthy borrower. Therefore, they will never lend you or any establishment under your control a dime. It’s harsh but true. There are loopholes, such as appointing a figurehead while you quietly pull strings. Or, you can use a private lender and even ask for a family loan. Still, they are risky options because private lenders are unscrupulous and taking a demotion reduces your power. And yes, there will be a time when the business needs a cash injection.

Can Lose Assets

Depending on the type of debt, a bankruptcy ruling might not be favourable. It’s true that companies have used it wipe their debts and keep their assets in tow. However, that is only an option if there is no money and the debts are unsecured. For secured debts, there is a good chance the bailiffs will knock down the door and take anything of value. points that the unlucky ones might lose their house or car. Don’t assume your situation will be the same as everyone else’s.

Taxes And Student Loans Remain

Whatever the situation, the amount of tax and student debt the firm owes won’t disappear. The government isn’t stupid, and they know they will never see the money again. So, filing for bankruptcy means this amount will stay the same until it gets paid. For the organisations whose debts mainly fall into this category, bankruptcy is a terrible move. Not only could you lose assets, but the debt might not get cleared either. Think about the type of arrears before making a final decision.

In the end, bankruptcy seems like a way out but only leads down a darker path.

Categories: Personal Finance

Tags: ,

Copy Protected by Chetan's WP-Copyprotect.