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Causes of Bankrupt Businesses

Posted on July 22, 2022July 22, 2022 By admin No Comments on Causes of Bankrupt Businesses

Small and large business owners alike carry a tremendous amount of responsibility. The future of the company lays on their shoulders and any employees they have rely on them to protect their jobs. Unfortunately, poor financial decisions are often made in these companies and there are fluctuations in the economy that occur without warning. In the event a business is unable to repay debts or afford to provide for their employees, they will most likely file for bankruptcy. Luckily, bankruptcy can help businesses that are in this situation. It can protect them from having to shut down the business and help them rebuild after the bankruptcy process.

There are several ways that a business can become bankrupt. However, it is important to realize that, regardless of the cause of a bankruptcy, this decision can sometimes be the best financial move for a business to make. Often, a business has to file for bankruptcy due to circumstances out of anyone’s control. Common reasons for a business to petition for bankruptcy include:

Inexperienced management

Negligent hiring

High interest loans

New competition

Poor economy

Lack of technology

Expensive basic operations

Failing to remain competitive with other businesses

Businesses that make these mistakes can not look back. Once the mistakes have been made, they will be forced to deal with the consequences. They will need to look forward and weigh their options. Filing for bankruptcy is a difficult process, but is worth the trouble. It gives a business a chance to recover and their owners and employees a chance to eventually return to their normal way of life.

Businesses are able to apply for bankruptcy through both Chapter 7 or Chapter 11. The type of bankruptcy will reflect how debts will be repaid. Chapter 7 is for those who will need debts released to recover. Chapter 11 can offer a repayment plan. Bankruptcy, in the long run, can save some businesses.

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