Failure in business can lead to debts that sometimes become difficult to eliminate. Bankruptcy is the only option left in these cases. However, with the social stigma attached to the term, a lot of business owners only think of this as the last resort.
Declaring oneself bankrupt is equivalent to giving up for a lot of people. Contrary to popular believes this is not true. Declaring bankruptcy can come as a wonderful new start for you as well as your business. But with the advantages, there are also disadvantages.
Businesses with low sales, maxed out borrowing limits and huge debts are most likely to go bankrupt. The inability to pay the bills or the salary to the employees is the biggest indicator that the business is going bankrupt. Bankruptcy can look different for each business and hence filing for insolvency can have its pros and cons depending on circumstances.
In this article, we will discuss these advantages and disadvantages of declaring a business bankrupt and whether it is a good option for you.
Pros of Declaring Bankruptcy
Unlike what people think, declaring going bankrupt does not mean that you have failed. It means that you are trying to save your finances and protecting yourself from the creditors for some time. Let us answer the question of what is the benefit of a bankruptcy in OKC below:
Gives You A Fresh Start
One of the biggest advantages of filing bankruptcy is that you get to have a fresh start without the stress of debt collectors and huge debts. A huge debt can overwhelm anyone, and it then stops you from re-building your business or finances. However, with your company declared bankrupt, you can start fresh with building your credit and putting back your business.
Protects Personal Assets
When you have declared yourself bankrupt, the creditors do not have any right to seize your personal property or essential assets such as your house, car and other commodities. Even though some of your assets will be taken by the court to pay back your debts, your essentials will remain with you so that you have a semblance of normalcy in your life.
Freedom from Creditors
One of the most tiresome and mentally taxing tasks is managing the creditors and debt collectors. But as soon as you declare yourself bankrupt, it will put an automatic stay on these collectors from taking any legal action on you or your business. They will be forced to stop collecting your personal property or even calling and harassing you to pay back the debt. Also, it will save you from evictions, wage garnishments, foreclosures as well as utility shutoffs.
Educate You About Finances
People who file for insolvency are given compulsory lessons in the management of finances. This is a good chance for you to learn and manage your finances better in the future. With some sound advice from the experts, you can easily avoid making mistakes and make sound decisions in the future.
Cons of Declaring Bankruptcy
As there are two sides to a coin, there are some disadvantages of filing for bankruptcy. These disadvantages include the following:
Dropping of The Credit Score
Declaring oneself bankrupt means that the credit score that you have built over the years will go down drastically and will take you about 8-10 years to recover it completely. You will also find problems while looking for new investments and loans. To know more about the disadvantages of bankruptcy, check this link.
- Bad Publicity for The Company
Bankruptcy is a public record and hence if you are a company that is in the public eye, it can lead to lots of bad publicity for you. Even if you are not a public company, the tag will stay with you and you will have difficulty doing business with the other companies. Since insolvency is usually associated with failure, most companies will refrain from doing business with you which can be detrimental for profits and sales.
Cost of Attorney and Filing
The entire process by no means is cheap. You will have to pay a hefty fee to a good attorney that specializes in cases similar to yours so that you can get the best deal out of your situation. Also, the filing charges are high. For a person who is already under a lot of debt, this can be challenging.
Chance of Losing Property
Lastly, there is no guarantee that you will be able to retain all of your property. There is a chance that you might lose some of your assets by the order of the court. However, most of your essentials will stay intact.
Should I Go To A Bankruptcy Specialist Lawyer?
If you have decided to file insolvency, it is extremely important to find a lawyer to discuss the legalities of the entire process. Even though you can easily ask any lawyer to do the job, a specialist will help you in finding the best way out.
There are a lot of firms that offer bankruptcy services for the businesses as well as individuals. To make sure that you are in good hands, do your research and read the reviews online. Take some advice from your friends and family. Know more about bankruptcy here: https://en.wikipedia.org/wiki/Bankruptcy
You can meet some lawyers and ask them to provide you with contacts of their previous clients. Always check that the law firm or the lawyer has a license to practice.
The right lawyer will get you the best deal out of your bankruptcy and will help you in handling your finances while also being able to save your company. There are three major options for businesses including Chapter 7, Chapter 11 and Chapter 13 Bankruptcy. Your lawyer will help you in deciding which is most suitable for your condition.
To Sum Up
There are certain advantages and disadvantages of declaring bankruptcy. Whether or not it is right for you to file bankruptcy is dependent on your situation. Hence, consulting a lawyer specializing in the field can be the best course of action for you and your business in the long run.