Michigan

Bankruptcy Basics for Troubled Michigan Companies

No doubt about it, these are troubled times. The Michigan economy is in the tank, and as the auto companies teeter on the edge, many Michigan businesses are facing difficult decisions regarding their finances and future operations.

Although no one running a business likes to think about it, bankruptcy is an option for financially insolvent companies that should be carefully considered in certain situations. Bankruptcy is the last resort for a business in financial crisis. A company that files a bankruptcy petition wins an immediate break from being pursued by creditors due to the "automatic stay" that is put into place when a bankruptcy is filed.

There are two types of business bankruptcies: Chapter 11 and Chapter 7. These refer to chapters of the United States Bankruptcy Code. Filing under Chapter 11 is essentially a court-supervised reorganization, and allows a business to keep possession of its assets, propose a plan to restructure its debts, and (hopefully) emerge from bankruptcy in much improved financial condition. Chapter 7 is a much more drastic remedy, and is only invoked when a company's business problems become too severe to remedy. In a Chapter 7 bankruptcy, a trustee is appointed to liquidate the company's assets and distribute the proceeds to creditors.

If your business is facing financial difficulties, you should immediately consult with a trusted adviser such as an accountant or attorney to help you review your options.

Full post as published by Michigan Business Lawyer Blog on November 05, 2008 (boomark / email).