If your North Carolina company is struggling to pay its debts in a timely manner, it may be a good idea to file for Chapter 11 bankruptcy. This type of proceeding allows a company to reorganize its finances without having to go out of business. Take a closer look at how this process may help your company retain its competitive edge over the next several years.
You can renegotiate union or vendor contracts
A Chapter 11 proceeding will likely provide you with an opportunity to renegotiate contracts with vendors, employees or other parties. In fact, it may be possible to unilaterally terminate any contract that you think is a hindrance to your company’s success. This can provide your company with the financial flexibility it needs to avoid closing its doors before its economic circumstances improve.
Debts can be partially or fully discharged
Your proposed repayment plan can stipulate that creditors will only receive a portion of any outstanding balances that they are owed. If necessary, you may propose that all outstanding balances owed to creditors be discharged as part of your planned reorganization. It’s important to note that your reorganization plan does not go into effect until it is approved by creditors and the judge overseeing your case.
Sole proprietors may be eligible for Chapter 11 protection
Sole proprietors who have too much debt to qualify for Chapter 13 protection may seek a Chapter 11 commercial bankruptcy. This may allow them to retain personal assets while also repaying a portion of what they owe to their creditors.
If you are looking to improve your company’s financial health, a commercial bankruptcy may help accomplish your goal. You should expect a Chapter 11 proceeding to last anywhere from six months to a full year.