Bankruptcy Business Information

Introduction

Bankruptcy occurs when an individual or an organization is unable to pay their creditors. A business is said to be bankrupt when it reaches a position where it is not able to pay its bills. Bankruptcy Business is a legal process that a business passes through when it is not able to pat its debts. The rules and procedures are designated by U.S. federal law (Title 11 of the United States Code).

History

Bankruptcy Business is not a new thing in the United States. The largest corporate in the history of U.S. to undergo bankruptcy business was the Lehman Brothers Holdings with assets worth 691 Billion Dollars on 15th September, 2008 which at one time was the fourth largest Wall Street investment firm. Others include Washington mutual, World Com, American Airline, CIT, Enron, Conseco, Chrysler and Thornburg Mortgage.

Features

Bankruptcy may be caused by a number of factors which may include, inside business conditions such as poor management and trade credit loss, outside conditions such as competition, financial problems such as capital loss and cash flow problems, tax related problems and uncompensated business accidents which may lead to loss of a lot of cash. A company that is undergoing bankruptcy may file for Bankruptcy Business. There are two types of bankruptcy business:

Liquidation

Contained in Chapter 7, company assets are sold to provide funds to repay the creditors.

Reorganization

Contained in Chapter 11, company is allowed to continue its business as it reorganizes to repay its creditors. Under this chapter, the company becomes a debtor in possession where the business maintains ownership and control of assets while continuing its regular operations. The company discloses all of its assets and provides a list of all the debts that it is seeking protection from. The advantages of filling for bankruptcy business under Chapter 11 are centered around buying time in that you get an automatic stay from having to pay creditors, you can accept and reject contracts and you can propose a plan on how to reorganize your balance sheet. However, due to a bad cash flow, most businesses in bankruptcy cannot afford an attorney and the high court fees and hence end up being liquidated.

All businesses have strategic business plans that support continuous growth of the business and therefore should ensure insolvency is kept at bay. This can be ensured by use of the following tips.

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