Finance Bankruptcy

Bankruptcy Business Information

Published at 03/29/2012 21:00:15


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).


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.


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:


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


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.

Tips and comments

Minimize debt

Though every business has a strategic plan to become a big organization in future, it is always advisable to start out small and increase gently as time goes. This entails borrowing small debts as you start that can be easily managed by our small start up cash inflows. The amount of debt should increase gently as your company grows and cash inflow increases. The less significant your financial condition, higher can be your earnings.

Develop your managerial skills

Many businesses fail or end up in Bankruptcy Business for lack of adequate managerial skills and an entrepreneur that aims at achieving business growth must be able to professionally handle the employees, cash flow, and production line or employ a skilled manager to run the business. Good managerial skills will also ensure that you have the right employees who are motivated and geared towards the over all company goals and objectives.

Negotiate well with the lenders

In case you run into a bad cash flow situation, it is advisable to talk with your creditors on the terms of payment. This may include agreeing on a longer payment period that will reduce amount of cash out flow to fit your unfavorable cash inflow. Negotiate well with the lenders will also entail fully Disclose Your Financial Situation to the creditor. Failure of full disclosure is considered a fraud.

Make use of collection agencies

Uncollected debt affects your cash flow and you should utilize the services of collection agents to help you in collecting your debts from defaulters.


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