Many people view bankruptcy as a failure, as an end to the business. While a Chapter 7 bankruptcy means liquidation of a business, it is not the only bankruptcy option available for businesses. Through Chapter 11 bankruptcy, New York companies can restructure and rescue their operations.
What Is Chapter 11 Bankruptcy?
New York business owners may be confused by exactly what is meant by bankruptcy. A business that goes into Chapter 7 is not going to recover. The business assets will be sold off and the proceeds will be used to pay as much of the debt the business owes as possible. Components of the business may continue to operate, for example a retail chain could sell off individual stores to new owners, but the core business is gone.
When possible, organizations prefer to file under Chapter 11 bankruptcy. New York companies that use this type of filing are relieved of some or all of their debt and allowed to continue operations. Creditors often prefer Chapter 11 because they can get a larger part of the debt paid off then liquidation would allow.
Is Chapter 11 The Right Choice?
Every situation is different but often companies are left with no other option other than bankruptcy, particularly in today's shaky economy. Otherwise healthy operations suddenly find revenue has dropped, debts have built up and they have no way to continue operations without some relief.
By filing Chapter 11 bankruptcy, New York businesses are given a second chance. Debt relief gives them the breathing room to reorganize the company and get it back on its feet. Sometimes businesses with a solid history of operation suffer unforeseen setbacks or even bad management that puts them in short-term danger. By allowing them to hang on through the tough times, jobs are saved and companies survive. Consider one of the most famous examples of Chapter 11 bankruptcy, New York retailer Macy's who came out of a 1992 bankruptcy stronger than before.
Life After Bankruptcy
While it is a step in the process, an organization's problems are not over after filing Chapter 11 bankruptcy. New York business owners who continue with the same practices as before aren't going to recover. Chapter 11 is about reorganization, and without that it's just delaying the inevitable.
This is the time to face hard questions about why the company is in the situation it is. It's easy to say "It's the economy" but if it were that simple every company would be in bankruptcy. Make positive changes in operations, management and business strategy to run leaner and tougher in the future. Macy's made substantial changes in their basic business operations and philosophies; changes that probably were hard for upper management to swallow.
Bankruptcy is like CPR. It may save your life, but if you don't change your ways and get healthy, the next heart attack might be your last.
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