Businesses can often remain in business, even with financial problems, if they can restructure their debts.
General Motors, Chrysler, Delta, Sbarro, Kmart, Owens Corning, Fuddruckers, and a host of other major American businesses have successfully reorganized. All of them remain in business today, thanks to those successful reorganizations.
Seminars abound to educate entrepreneurs about how to start a business. Few if any of those seminars offer guidance on what to do when things are not going so well, like when there isn’t enough cash to cover payroll taxes, or perhaps even payroll itself. Like when the bank is asking for more collateral, or refuses to renew a loan. Businesses and their owners need to know how to address these problems without placing the business in any further risk.
A primary purpose of a Chapter 11 reorganization is to provide the business with breathing room. An Automatic Stay is imposed immediately, providing that space in the form of both time and cash flow. That time and improved cash flow is then used to prepare and present a restructuring plan.
A reorganization plan might consist of divesting the business of unprofitable or nonproductive assets. It might change the payment structure, whether by interest rate or amortization. It might significantly reduce the overall indebtedness. Other benefits might include the following:
10 Things that a Reorganization can do for a troubled business:
- Lower your payments
- Lower your Interest Rate
- Stop Foreclosure and Prevent Repossession
- Protect your personal assets
- Encourage workout agreements
- Prevent revocation of sales tax permits
- Force your lender to extend the loan for 5 to 20 years, even your loan has matured
- Stop tax levies, and force tax authorities to take payments over 5 years
- Pay unsecured creditors a percentage of the debt on a schedule you can afford
- Reject unprofitable leases and contracts
These are all actions which the reorganized businesses referenced above used to stay in business. Understand, though, that the reorganization process is quite complicated. Be sure that you are consulting with an attorney who has experience in this area. Having that consultation as soon as problems show up on the horizon can lower your costs and increase the likelihood of a successful reorganization of your business.
Krekeler Strother handles more Chapter 11 cases than any other firm in Wisconsin. Why? Because we get results. We help quickly.