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Commercial Bankruptcy Can Mean A New Life For A Business

Posted on November 3rd, 2014

Many people see bankruptcy as symbolic of failure. In fact, bankruptcy can provide a fresh start for an individual or entity. Small companies to large corporations in Arizona and across the country use business bankruptcy to continue business operations while negotiating with creditors. In the case of an east coast ski resort, mild winter weather could have ended operations were it not saved by a Chapter 11.

 

A commercial bankruptcy stopped creditors from shutting the ski resort after it struggled with cash-flow problems and a lack of snow. The Chapter 11 allowed the resort to continue operating while it sought a solution to it financial troubles. The solution came in the form of new ownership.

 

Two men from the area in which the resort is located offered to purchase it. The bankruptcy court approval of the $6.76 million sale means that the resort can remain open. The new owners promised to make capital improvements to revitalize the resort.

 

The filing of a business bankruptcy does not have to mean the end of a business. During Chapter 11, the owners of a business can renegotiate debt with creditors to obtain more favorable terms. Unfavorable leases can be cancelled and new ones negotiated, or the business can seek other locations with more rents that do not place a financial strain on the business.

 

If a business is unable through its attorney to restructure its debt so it can emerge from bankruptcy stronger and able to continue operations, the Chapter 11 reorganization can become a Chapter 7 liquidation. In that case, the assets of the corporation are sold and the money used to repay as much of the debt owed to creditors as possible. Debt that cannot be paid from the liquidation of assets is discharged.

 

Source: Cornell Daily Sun, “After facing bankruptcy, Greek Peak sold in auction,” Tyler Alicea, March 29, 2013

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