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What you need to know before starting bankruptcy proceedings

annil chauhan
What you need to know before starting bankruptcy proceedings

Sometimes it seems to us that business has reached an impasse that debts are unthinkable and it will not work to repay them. So, it was precisely at this time that the idea of the beginning of bankruptcy came to my mind more and more often.

Nevertheless, before taking this last step, it is still worth exploring all the possible ways of moving the business and the channels for receiving funds to avoid bankruptcy. Bankruptcy is a serious step with far-reaching consequences, so do not let the panic and anxiety that has swept through you push you to something that you will bitterly regret later.

Bankruptcy alone is not cheap. And it's not just about money. Moreover, such a turn of events can seriously harm your credit history and you can forget about the future loan in a business bank, if not forever, then for the next few years. Think and weigh ten times. Here are just a few factors to keep in mind before you start bankruptcy proceedings.

1. Not all debts will disappear

One of the most common (and destructive) bankruptcy myths is the notion that all debts will disappear as if by magic. Unfortunately, this is far from the case.

Some types of debts remain even after you are officially declared bankrupt. These, for example, include such things as child support and child support benefits. These are your debts that have nothing to do with business. The same applies to non-payment of taxes or debts on utility bills: these amounts will hang on you dead weight, regardless of whether you are conducting a business or not.

Carefully think over this information and figure out whether it is profitable to start the bankruptcy procedure of the enterprise, to spend energy, money, and health if these debts (if any) remain with you and the problem does not disappear.

2. Filing for bankruptcy is expensive

Do not be fooled if it seems to you that starting a bankruptcy procedure is easier than ever and you do not need to spend money on this. This is a very expensive pleasure. The application itself will not be free, and you will have to start the procedure for paying debts according to the plan. The court will certainly require you to pay a fee for applying, and if your case is especially complicated, then you will need to pay also the services of a lawyer to prove your insolvency on business loans.

The law does not prohibit going to court on an independent basis without legal assistance, but usually, the process is quite complicated and you need to provide so much that you cannot do without a competent defender. After all, the consequences of mistakes can be too serious.

3. There are several ways to go bankrupt

The bankruptcy procedure, although quite universal for different countries, however, depending on where your business is registered, there may be several ways to become bankrupt. Here you need to make no mistake and choose the right one.

For example, in some countries, there are several categories of bankruptcy, and only one of them means the complete closure of the enterprise. The rest, however, involves various agreements between creditors and debtors on loan repayment procedures and debt restructuring.

Before starting bankruptcy, consult with financial advisors regarding your actions. They will advise how to draw up a statement and which option to stop to try to avoid the complete closure of the enterprise and preserve some assets.

4. Long term effects

No need to think that bankruptcy is the solution to all financial problems. If this were true, then the business would have no incentive to try to survive. Closing a business, you will not start from scratch. History will not go anywhere and getting a new loan at the beginning of a commercial enterprise will be very difficult, if not impossible. When your creditworthiness is assessed in the future, this mistake in the past will have a serious impact on the final decision of the commission.

Every year, thousands of enterprises begin bankruptcy proceedings to officially cease to exist. Their owners think that having caught their breath a little, they can open a new business, which, perhaps, will be lucky a little more than the bankrupt.

However, now you know that this is a complex process that greatly affects the entire future life and activity of the entrepreneur, so it’s worth ten times to think about whether you need to embark on this dangerous and fraught with various unpleasant consequences.

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annil chauhan
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