Many businesses have been facing considerable challenges in the times of COVID-19. While some have managed to scrape their way through, others are facing a tough time dealing with their situation and have to look at last resort options, such as filing for bankruptcy.
No business can survive without taking a few hits but what do you do when the hits seem to keep piling on? It is not uncommon for a lot of businesses to go neck-deep in debts from time to time. Taking the option to file for Bankruptcy, on the other hand, is a little more complicated. If you have a business that has found itself in such a sticky situation, you will surely want to weigh out all your options before taking such a drastic step.
Today, more and more companies are exploring the option to file for bankruptcy. In these trying times of COVID-19, many businesses have suffered unimaginable losses. Various issues like creditor debt and a shortage of work have forced companies to choose bankruptcy Filing as a form of a last resort to save their businesses.
The big question now is: how neck-deep do you need to be in debt in order to file for bankruptcy?
Contrary to popular belief you do not necessarily need to surpass a particular threshold of debt in order to file for bankruptcy. While any amount of debt helps in filing for bankruptcy, there are certain parameters under which you are more likely to get a happy outcome. Each case is looked into by a bankruptcy court which peruses all your assets, records, tax filings, and other areas that are relevant to your case.
Another important thing to consider when filing for bankruptcy is your end goal. The most common bankruptcy filings are chapters 7 and 11. Chapter 7 Bankruptcy Filing is often referred to as ‘liquidation bankruptcy’. Businesses who are looking to liquidate their entire bodies and pay off their debts often choose this filing. On the other hand, Chapter 11 Bankruptcy Filing is chosen by businesses who wish to restructure themselves and pay off their debts in a systematic way. Businesses who opt for chapter 11 bankruptcy filing often plan to continue their activities and paying off creditor debt is just a part of their plan rather than the end goal. Neither of these filings require you to have a certain amount of debt to file for bankruptcy. In fact, a chapter 11 filing is applicable not just for businesses but for everyone. You can file for it regardless of whether you are an individual, an LLP (Limited Liability Partnership), or pretty much anything else. The primary aim of a chapter 11 filing is to provide each of the parties with some debt relief.
In terms of distress, any business wants to opt for a cheap bankruptcy filing so that it can start working on a way out of its current situation. That being said, filing for bankruptcy can have some considerable downsides. For starters, a bankruptcy filing ruins your credit score for a period of about seven to ten years. This can have a significant impact on your life, and this is why a lot of businesses seek alternatives to paying off their debt instead of simply filing for bankruptcy. In many cases, companies have to deal with something called ‘nondischargeable debts. As the name suggests, these are debts that are too essential to be waived off. Before filing for bankruptcy, you will want to ensure that you don’t have a considerable amount of nondischargeable debts. If this is the case, filing for bankruptcy will barely do you any good and most of your debt will remain in place.
Finding affordable lawyers for your bankruptcy filing is a herculean task. Fortunately, At Dsouza & Strachan Law Group, you will find a very capable team of bankruptcy attorneys. These lawyers will not only be able to file your case perfectly but also aim to help you choose the best option for your business. Call us today.