If your business is in financial trouble, you may be considering either a Chapter 11 or a Chapter 13 bankruptcy to avoid liquidation. When used wisely, either type will give you the chance to restructure your business debts and practices in order to attain more income for the business and insure its future growth. However, before you can proceed with business bankruptcy, the plan must be approved by a federal court.
When you are beginning the process of restructuring your business tax debt and operations, you should research several debt restructuring service companies in your local area. Any counselor you consider working with should be certified by the American Board of Certification. Be sure to ask about their success with past restructuring efforts and to check with the Better Business Bureau before making a final decision.
In order to generate more capital for your business, give shareholders the option to purchase additional shares. Let them know about your current restructuring plan with the hope that it will generate interest in your new securities offering. You should also be prepared to have share prices decline during this restructuring period.
In exchange for creditor equity in your business, you can offer to exchange part of your debt; however, be certain that the amount of equity given will not exceed 51 percent. If that happens, you would be handing creditors control of your business.
Write a proposal for the restructuring of your business debt and present it to each creditor, or have it presented to them by a third-party debt agency if you are using one. After your creditors have voted on the proposal, be prepared to enter into negotiations if necessary.
Look for ways to decrease the operating costs of your business. This may have to come at the expense of certain employee benefits, selling or downsizing equipment or the reduction of staff. You will need to be prepared to make difficult decisions in order to attain the cash flow necessary to repay loans.
If you are using the services of a debt management agency, be certain to follow up with creditors every month to insure they are receiving the payments that were promised them. If you find that lenders are not receiving their payments as expected, you will need to take swift action to replace your current debt restructuring company before your creditors file bankruptcy against you.