Bankruptcy is something we all hope to avoid. Society has long pushed it out there as an ugly and undesirable thing, yet there are positives to bankruptcy as well – otherwise what would be the point in filing? When bankruptcy does become a possibility, no matter how small, it’s best to immediately understand what these positives could be.
Remember always discuss your financial situation with the specialists before making a decision, as each case varies. Unsure where to start? You could start with your own financial lawyers, or call John Steinberger & Associates.
- Delaying Debt Payments
Filing for bankruptcy can give you a temporary suspension on payments of debts. When this happens, there is a chance for your creditors to discuss potential payment terms with you, based on what your reorganization plan is. They may also ask for access to this plan and sometimes it’s legally required to give it to them. Creditors may be willing to settle for a percentage of the original debts as a settlement, assuming you can figure out workable payments in your reorganization plan.
The other advantage here is to stop any constant letters, phone calls or other harassment from creditors. This time should be used for planning and reorganizing, not dealing with the stress of people chasing their debts.
- Contract Renegotiation
When you file, along with a break on debt payments, any existing contracts can also be suspended. This gives you a chance to talk to any suppliers, contractors or other partners and negotiate new terms. Remember these people are working with you as much as you work with them. They often want you or your business to survive long term because that means a successful long-term business relationship. To achieve this, they are often willing to negotiate better terms, even temporarily, to help you stay afloat.
- Chance to Rebuild Credit
One of the biggest mistakes people make in this type of situation is to bury their head in the sand. So many people start to panic when things are going badly and they freak out and hide from it. This allows debts to build bigger and bigger, while your credit rating dies a messy death. The better option is just to face up to it and start looking at bankruptcy options. From here you can rebuild your credit and start working your way back up.
- Possible Competitive Advantage
The ability to restart with a temporary suspension on debts, renegotiated contracts and more can give you a competitive advantage over other businesses. This can be a great way to squeeze back into the market and place yourself in a better long-term position. Remember the advantage won’t last forever, so plan around that and be prepared for when it ends.
- Can Remove Tax Liabilities
Some tax liabilities, particularly those over a few years old, can be wiped completely in the case of bankruptcy. This is another place you can cut some of your expected expenses and help your fresh start.