A variety of options may be available short of filing bankruptcy.

Unexpected financial stress can happen to any business, in any sector, of any size or type. Any number of things in the economy or in governmental regulation can occur that impact the bottom line. For some smaller or family businesses, unexpected personal crises can spill over into the health of the business.

If this sounds like your current situation as a business owner, it is time to consult professionals about how to solve the issues before you. Talk to a lawyer who works with businesses to solve financial problems, including bankruptcy.

Legal counsel can look at the nature of your business and the type and extent of financial distress. If needed, you can also consult other professionals like accountants or appraisers, depending on your needs. Considering your short- and long-term goals for your family and your business, the attorney can explain the options available to you and their pros and cons.

While you may ultimately decide to file bankruptcy, which may be a good option for you, other alternatives may end up being better choices for your situation.

Initial matters

Obviously, your plan will vary depending on whether you want to remain a going concern or if it is smarter for you to take a different path. While you might change your mind later, consider whether you want to stay in business (even if you might have to adjust it to continue), sell the business, or wind it down and liquidate the assets.

Debt restructuring

When a business carries too much debt, it may be possible to restructure or reorganize that debt by negotiating with creditors to modify the terms of debts like mortgages, operating loans or lines of credit. Many ways to do a workout exist that either result in reduction of debt principal, lowered payments or interest, or lengthened time for repayment.

Related options include:

  • Receivership: A third party manages the business assets through the period of financial stress.
  • Assignment for the benefit or creditors or ABC: Often used as a liquidation technique, in an ABC the business transfers its assets to a third party who will sell them to pay off the business creditors.
  • Trust mortgage: A trustee is given a mortgage of the business property. The trustee runs the business and pays its obligations until the business is either financially sound, when the business operation returns to its owners, or it becomes necessary to wind it down if financial recovery does not occur.

Creative options

There may be relief through unconventional means. Perhaps you have an investor or a family member who would like to go into business with you. Maybe the business could become leaner by closing down part of its operations to concentrate on a smaller version of itself. Perhaps it could remain viable by moving to a smaller or cheaper location or laying off staff. Can you eliminate or postpone some expenses? Could you sell some assets? Consider all options and their pros and cons.

Finally, be sure you do discuss bankruptcy options thoroughly with a bankruptcy attorney, so you are fully informed in making decisions to move forward.

The lawyers at Nickless, Phillips and O’Connor in Fitchburg, Massachusetts, represent business owners in a wide variety of debt relief and reorganization options, including bankruptcy.


-On behalf of David Nickless