Business and commercial bankruptcy options exist to help companies eliminate debt and return to profitability.
A long-time Montgomery company recently pursued this option to reduce debt and return to profitability. Reports indicate that the Kane County business, which employs more than 400 local workers, has filed for Chapter 11 business bankruptcy. Reports indicate that the company has filed the necessary paperwork to lay off more than 100 employees; however, the company is also possibly seeking a potential buyer of the company, so the future of the company is not entirely clear at this point.
The company began as a sheet metal producer over a hundred years ago and today manufactures “lockers, industrial storage and workspace products.” A reorganization plan could shift the focus of their operations, depending on how the bankruptcy and potential buyout proceeds.
The goal of Chapter 11 — unlike a Chapter 7 bankruptcy that requires the liquidation of assets — is for the company to restructure its debt burdens into a payment plan that the company can manage. Once the Chapter 11 bankruptcy petition is filed, all collection activities by creditors must cease. This allows the company time to develop a repayment plan, which will be approved by the court.
The repayment plan that the company develops must be approved of declined by creditors and approved by the court. Once the plan is approved, debt that existed prior to the plan but not addressed in it is discharged. All that is left for the filing company to do is to honor the repayment plan and return to a path of profitability. This is why it’s important to make sure the repayment and restructuring plans are designed in a way that best suits the needs of business owners and their employees.
Source: Montgomery Patch, “Longtime Montgomery Company Files For Chapter 11 Bankruptcy,” Steven Jack, Feb. 7, 2013