Many might think filing bankruptcy means giving up. However, in severe conditions, it can give a fresh start to your business. It might be the better way to rescue your business. Meanwhile, there are also many consequences for this financial approach. I will discuss everything about bankruptcy. So, read on to uncover these valuable insights in detail. Let us look at the benefits of this filing:
Pros
Now, I will take you through the advantages of filing for bankruptcy.
[1] You will be relieved from the creditors
Are your creditors constantly demanding payments? Then, filing for bankruptcy can force them to stop. This process will either discharge your debt or restructure it. The old debts can be converted into new payment plans. This loan consolidation will be easy for you. These approaches can be beneficial to gain control over your finances.
[2] You will protect your assets
From my knowledge, bankruptcy law protects certain personal assets. This will ensure that the individual will not be devoid of themselves. For example, retirement savings and personal residence are safeguarded under this law. This law will limit the creditors to claim the belongings of the individual.
[3] You will have a chance to start over
In my opinion, this approach literally means starting over again. It is a second chance for your financial journey. You can keep running your business by restructuring the debts into manageable ones. If you have accumulated so many loans, then filing for bankruptcy will enable you to have better financial stability.
Cons
Now, I will discuss the disadvantages of bankruptcy.
[1] You will damage your credit score
Your credit score can be significantly affected by this. It will fall by large points. This filing can also be evident on your credit reports for nearly a decade. With a bad score, it can be challenging to get a new loan. To do so, you will need a higher credit score. You might struggle with mortgages in the future. In my opinion, you and your business will face this issue.
[2] You will have to face a lengthy and expensive process
It will take too many days to complete the filing process. In some cases, it can also take several months. From my understanding, you will have to spend time in court and negotiating with the creditors. Meanwhile, thinking of strategies also requires time. Apart from these, your legal aid will also require fees. There are also other charges involved.
[3] You will break the vendor relationship
It might look like you are only fighting in this case. However, this is not the case. Your vendor will also be fighting to keep their business profitable. When you declare bankruptcy, they will also have to face severe losses. After all the legalities and fighting, your relationship with them will not be as good as before.
[4] You will have to hand over your business assets
In this process, the court will sell your firm’s assets. This will be used to repay the creditors. Meanwhile, if you have personally taken any business debts, then the court might come after your personal debts. This is unless you also have filed for bankruptcy along with your company. I would advise you to talk clearly with a financial advisor. They will discuss other options.
To conclude
Declaring bankruptcy involves extreme steps. These steps will also have many consequences. It can save your business in some situations. Consult a lawyer before making any move. They will properly understand your situation. They will help you know everything about declaring bankruptcy.
I hope you found this blog post informative.
