Unfortunately, any business owner may find the day they are facing financial distress which cannot be solved by simple means. If you are facing bankruptcy, please reach out to our team of bankruptcy attorneys in Southfield. We are here to help you consider all your options when it comes to filing for bankruptcy. We will provide you with helpful bankruptcy information, including the alternatives to bankruptcy that exist.
One such alternative to filing bankruptcy is workouts. Workouts are a method in which debts are resolved without the need for the business to file any form of bankruptcy. The obvious advantage to alternatives is that a business is not tarnished by having a bankruptcy on its record. Workouts are unique and when handled by a professional bankruptcy attorney can be an extremely smooth, beneficial process for both the debtor and creditor.
What Happens in a Workout?
A workout is essentially a deal struck between the debtor and creditors in which the creditor accepts an alternative plan in regards to the money owed. The process involves negotiating individualized terms with creditors. Two terms used in regards to workouts are compositions and extensions.
A composition is essentially a negotiation between the debtor and creditors in which the creditors accept a partial payment instead of the full amount owed. This partial satisfaction can be beneficial for the creditors because they are at least guaranteed part of what is owed.
An extension is an agreement in which a time extension is given for payment. The debtor agrees to pay the creditors through some sort of payment plan or on a later date.
Sometimes, workouts involve both extensions and composition agreements. In this case, the creditor accepts less than the original claim owed and allows for that lesser amount to be paid at a later date than originally agreed upon.
Is This the Right Bankruptcy Alternative for Your Business?
Will a non-bankruptcy workout be the right choice for your business? This really depends on a variety of factors. A major factor is of course the creditors owed. Not all creditors are open to a workout agreement. The best way to determine if this plan will work for your business is to consult with our bankruptcy attorneys and learn more about all the bankruptcy information available. We can help you consider your particular situation and decide what plan will work best for you.
The following are the pros and cons of a workout agreement:
- Pro: You will not have a bankruptcy on your record. The best part about finding an alternative to filing bankruptcy is you are not saddled with the negative repercussions to your credit that bankruptcy entails. This also leaves the availability to file for bankruptcy at a later date, as in some situations once you file a certain type of bankruptcy you are not capable of filing again.
- Pro: It is voluntary. The great thing about a workout agreement is that it is a voluntary agreement between a debtor and creditors without the need for a court to dictate what is happening. It is still important to consult with an experienced attorney so the agreement made is clear, legally binding, and in the best interest of your business.
- Con: The only major drawback to a workout agreement is simply that you are at the mercy of the creditors. Not all creditors will want to agree to less than their original claims. Navigating this negotiation can be tricky, but it is definitely not outside of the realm of possibility.
Talk to Our Team Today
If you are considering filing bankruptcy because your business has reached a financial mountain you are incapable of climbing, please contact our team right away. If bankruptcy is the best choice for you, then we will help you file the right form of bankruptcy that best benefits your business. However, we will also provide you with information on bankruptcy alternatives like workout agreements. Our goal is give you sound advice and allow you to fully understand what each option provides for your future. We have experience handling a variety of business bankruptcy cases, and we understand the long term effects each one will have upon your future. We can talk to you about rebuilding your credit, creating a solid plan going forward so you can avoid facing bankruptcy again, and more. Contact our team today to learn more.