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Many companies emerge stronger from Chapter 11 bankruptcy

On Behalf of | Dec 12, 2019 | Bankruptcy, Chapter 11 | 0 comments

Whether filing for consumer or commercial bankruptcy in New York, it can feel like an admission of financial failure. When a business is involved, entrepreneurs may feel as though their entire life’s work has gone up in smoke. These are natural feelings to harbor but bankruptcy is not the end of the world. Tens of thousands of companies file for bankruptcy each year and many get right back into the game shortly after.

Business Insider estimates that every year, more than 20,000 companies file for bankruptcy. It pointed out that many iconic companies in America also used bankruptcies to weather financial hardships and carry on. These companies remain successful today. Among these are Delta and General Motors. Still, this comes down to the type of bankruptcy that the company executives choose.

Chapter 7 bankruptcy is harder to come back from as the company dissolves and liquidates its assets to repay debts. In a Chapter 11 bankruptcy, the company remains in operation, while either selling some assets or crafting a new plan for reorganization and repayment. One company currently following this plan is Toys R Us.

Forbes points out that, for many people, the negative connotations for bankruptcy comes from years of playing the Monopoly game. After all, in the game, filing for bankruptcy essentially means game over. In real life, when companies have a cash shortage and have over-extended their credit lines, then Chapter 11 may help them to resolve financial issues while keeping the company intact to compete for another day.

Finally, after bankruptcy, some business owners find the safe exit they want. The company may trade for a lower value, making an acquisition favorable. This can allow them to either retire peacefully or move on to a new project they may have wanted to tackle for years.