Businesses have their ups and downs, but they usually pull off stronger than ever after facing a monumental obstacle. However, some business owners had to make the difficult decision of filing for a Chapter 11 bankruptcy. This allows a business to withhold payment for most of its creditors as long as it undergoes a reorganization plan that includes project repayment initiatives.
Unlike a Chapter 7 bankruptcy, a business entity under a Chapter 11 bankruptcy must pay off withheld dues from creditors as the debtor. This means a business owner can’t just wave their outstanding debt. Since it’s an agreement that still maintains ties with creditors, it’s important to have an effective financial plan to pay off these dues. Thankfully, there are financial strategies you can use to streamline your repayment efforts.
What Happens After Filing a Chapter 11 Bankruptcy?
Businesses in financial distress will benefit more from filing for bankruptcy instead of utilizing loans upon loans to temporarily pay off debt. Although out-of-court workouts can be effective strategies, they’re not always reliable and consistent with the outcome. For this reason, the best course of action for a business owner is to restructure with a Chapter 11 bankruptcy.
A Chapter 11 bankruptcy gives you a wide range of options for facilitating your financial strategies. Since recovering a business positive revenue stream will also require capital, it’s necessary for the debtor to find financial supporters. Unfortunately, lenders may be reluctant to take on borrowers trying to recover from their financial dilemma. Thankfully, the Bankruptcy Code can ease the risks a lender could take through Debtor-in-Possession Financing.
How Can Debtor-in-Possession (DIP) Financing Help with a Bankruptcy?
Debtor-in-Possession is a funding option provided for businesses that file for Chapter 11 bankruptcy. This gives borrowers the credibility to take out loans from lenders since they have a viable reorganization plan in place appr