Chapter 11 bankruptcies are a form of bankruptcy specifically reserved for high net worth individuals and companies. In a Chapter 11, the corporation or partnership is allowed to present a plan of reorganization that allows the company to stay up and running while modifying the payment to creditors. Just about daily, a company somewhere in America declares this form of bankruptcy, but why is it that companies go bankrupt in the first place?
Many things can attribute to a business needing to declare bankruptcy, and while this doesn’t necessary mean that the company will close for ever, it can set a company’s growth back. One of the main reasons companies go bankrupt is a lack of liquidity. If a company is liquid it either has a lot of cash on hand or has assets that it can quickly turn into cash without losing money on the deal. If a company runs into a profit pitfall and isn’t liquid enough to raise money the company ends up having to renegotiate it’s already previously established deals.
Just like individuals, companies need to have money put back in case of emergencies. Also just like everyday people, the bankruptcy laws in the US afford the opportunity to restructure or even eliminate your debt if you have fallen victim to an emergency and have had a difficult time rebounding. If you aren’t able to get out of debt, it’s worth the time to talk to a bankruptcy attorney in Houston and find out what your debt relief options are.