A 6-Step Guide to Avoid Bankruptcy by Restructuring Business Debt

Even if your business debts have become too high to manage, you can still avoid bankruptcy. Whether it is under chapter 11 or chapter 13, you get a chance to rebuild your finances. The court restructures all your debts in a way that makes it easy for you to pay the monthly installments on your debts while you continue running your business. But, it is important for you to keep in mind that this type of bankruptcy remains on the record for the next 7 years, which means you will still have financial troubles even if you start making the repayments in a timely manner without making further defaults. That is the reason why it is often wise to restructure the business debts without needing to file a petition in the bankruptcy court. Following is a step-by-step guide on how to go about it.

Research Companies That Offer Debt Restructuring Services

There are several companies out there that can help you with you plan. They will handle everything on your behalf. Obviously, these services that can help you avoid bankruptcy do not come for free. You must be ready to pay a certain amount of money as their fee, which may range from just a few hundred dollars to a few thousand dollars. You must choose a reputable company who has a good track record for such services. Do not forget to do a thorough background check by contacting Better Business Bureau. The counselors in these types of companies must have license issued by the American Board of Certification. Make a personal visit to their offices to enquire about their success record and compare the quality of their services. This way, you will be able to choose the best debt restructuring company.

Generate More Capital

In order to make things much easier, you should also consider generating more capital for your business. You can do this by issuing more shares. True, the prices of the shares will definitely fall because of the kind of financial situation you are in, but it will also give a strong message to your shareholders that you are seriously trying to avoid bankruptcy. Make sure you educate your shareholders about your plans. This will keep their interest alive in you.

Offer Your Creditors Some Equity in Your Company

An easy way to settle some of the debts is to offer your creditors certain equity in your company. Make sure the amount of equity is not so high that provides your creditors total control of your business. Keep the control of the management to yourself.

Discuss Your Debt Structure Proposal with the Creditors

The next step is to invite all the creditors for a meeting, where you will present your proposal. Allow your creditors to vote for the proposal. You may have to make certain adjustments before the creditors agree for your plans. If they do agree, get it in writing from them. Make sure all of them sign on that agreement.

Manage Funds to Pay off the Restructured Debt

In order to avoid bankruptcy, you will need funds to pay the restructured debts. Do everything that can help you increase revenue and decrease expenses. There are plenty of things you can do; you can cut down the operating costs, downsize your employees and facilities, and an array of other such things that can help you save some money without adversely affecting your business operation.

It is entirely up to you to decide whether you want to use the services of debt restructuring companies or not. If you wish, you can go ahead with the process on your own. Either way, you will be on your way to avoid bankruptcy and regain control of your business affairs.

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