On the Brink of Bankruptcy? 3 Reasons to Consider Debt Restructuring

When a company’s debts become unserviceable, some form of bankruptcy will sometimes be the best option. Whether that means undergoing reorganization under Chapter 11 or submitting to Chapter 7 dissolution, bankruptcy sometimes proves to be the only way to resolve otherwise intractable financial problems.

On the other hand, many businesses have come right to the brink of bankruptcy and passed on by thanks to a strategic change of direction. Restructuring corporate debts can enable a lasting solution to financial troubles without the negative impact of bankruptcy.

Corporate Debt is Not Always a Problem

In the first quarter of 2019, United States Bankruptcy Courts handled more than 22,000 corporate bankruptcy filings. With nearly 14,000 of these businesses headed for liquidation and dissolution under Chapter 7, it is safe to say that a majority faced truly profound financial troubles.

On the other hand, the mere presence of significant amounts of corporate debt does not always necessitate such drastic action. Even if aggregate corporate debt nationwide has risen to unusually high levels, many businesses still use this potentially powerful financial tool responsibly and productively.

A Better Way for Companies to Obtain Financial Relief, in Many Cases

Somewhere in between these two extremes lie many businesses where the situation is more challenging to pin down. Companies can have difficulty keeping up with their debts and recurring financial obligation while remaining close to basic fiscal soundness.

In many such cases, it will pay to consider whether simply restructuring a business’s debts might provide the required leeway. Companies like Equify Financial regularly help corporate customers rearrange and reshape their obligations such that they become far more able to meet them.

In fact, that often proves to be a better option than submitting to a court-supervised reorganization under Chapter 11. Restructuring corporate debts instead frequently proves superior with regard to:

· Speed. Even though protection is often granted immediately, the bankruptcy process moves slowly by design. Creditors are always given plenty of time to respond to filings and proposals to be sure that their interests will be taken into consideration. Restructuring business debts outside of the court system can happen far more quickly in even the most complicated of cases.

· Cost. Financially strapped businesses still need to be able to pay for counsel and representation when they file for bankruptcy. All those hours add up and contribute to yet another financial burden. Having a financial services company restructure a business’s debts almost inevitably proves less costly when all is said and done.

· Impact. Bankruptcy filings are always public, and that can do real damage to a company’s reputation and standing. Privately arranged debt restructuring can happen without suppliers, clients, and other interested parties ever getting wind of the development. Even when negotiations with creditors spread some word of the process, businesses almost always end up better off compared to filing for Chapter 11.

Benefits like these make it quite frequently worthwhile to look into debt restructuring even when corporate bankruptcy seems appropriate. While there will be times when the court-imposed oversight and structure of Chapter 11 or even Chapter 7 makes more sense, debt restructuring is a potentially powerful tool in its own right. It is also one that is far less drastic and involved than either type of corporate bankruptcy.

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