We consider bankruptcy a last resort option, we always research and investigate all other potential ways to relieve your debt issues before recommending bankruptcy, dependent on your individual situation.
For companies, a company that runs into serious financial difficulties has alternatives to bankruptcy. It can liquidate the business on its own and make payments to its creditors. Such action may be achieved efficiently if business’s creditors are few and the assets can readily be converted to cash. If the number of creditors is large and the assets are numerous and difficult or time-consuming to sell (such as real estate), the protection, structure, and authority of the court may be needed.
Another option is for the company to place liquidation of assets in the hands of a trustee who subsequently pays creditors. The principal advantage of this avenue is that the assets are thus protected from individual creditors who might otherwise file liens on the assets. Composition agreements, meanwhile, can be used in situations where creditors agree to receive proportional (pro rata) payments of their claims in return for freeing the debtor company from the remainder of its debts.
These alternative strategies may enable some business owners to avoid the stigma of bankruptcy. But pursuing these options involves considerable risk: astute creditors will recognize such actions as precursors to bankruptcy and may modify their relationships with the company, which could precipitate a bankruptcy filing. If creditors believe that continuing in business will result in reduced assets, they may force a bankruptcy in order to stop operations and preserve the existing assets to pay outstanding debts.
For further information or to discuss getting help with bankruptcy, short sales, or foreclosures we invite you to schedule a free confidential consultation with our experienced northern and southern California bankruptcy attorneys by calling us at 916.983.2941, or filling out our contact us form on our website. The confidential consultation is free.