Four Business Bankruptcy Myths Exposed
No business owner hopes for bankruptcy. It’s not something that anyone looks forward to and often the aftermath involves a long struggle for a business to rebuild their credit. However, the reality is that life and business are unpredictable, and sometimes, things don’t go according to plan. Business owners often find themselves in very difficult financial circumstances. However, contrary to popular perception, “bankruptcy” does not represent final failure for a business. In fact, bankruptcy often represents a chance for a fresh start. In this blog entry, we look at several common myths surrounding the process of bankruptcy.
Myth 1: Businesses in Bankruptcy Are Not Financially Responsible
When people hear that a business has entered bankruptcy they often assume that the owner was not financially responsible. The fact is, however, that there can be many different reasons why a company has to file for bankruptcy. Sometimes it is that the market demand for their products or services unexpectedly dropped. Other times it could be that a client failed to make payments, which left the business without sufficient money to pay their bills. There are limitless reasons why a business could be facing bankruptcy, and in many cases, it has absolutely nothing to do with irresponsible management.
Myth 2: Bankruptcy Means Your Business Is Closing Down
Another common misunderstanding is that if you enter bankruptcy, your business must shut down permanently. In reality, many businesses go through the bankruptcy process to help restructure or eliminate some of their debt, and are able to emerge stronger than ever.
Myth 3: Bankruptcy Eliminates All Debts
Some business owners who know that they are going to have to declare bankruptcy are tempted to go out and rack up a lot of debt, assuming that they won’t have to repay it. During the bankruptcy process, however, if it is discovered that you made purchases on credit knowing that you couldn’t pay them back, they won’t likely be included in the bankruptcy.
Myth 4: Bankruptcy Ruins Your Credit Forever
Just like individuals, businesses have credit histories. While there is no doubt that a bankruptcy will harm your credit-worthiness, it is not permanent. With time and good financial decisions after a bankruptcy, you can restore your credit and regain access to capital when you need it.
Questions or comments? Facing financial challenges in your business? We can help – contact us today to learn more! From helping you rebuild your credit in Southfield to finding the right bankruptcy solution for your business, we are here to assist.