Louisville business owners very often become entrepreneurs not only because they have an interest in the type of business they are running, but also because they wish to have the independence that comes from being their own bosses. This means they have a lot freedom in how to run their businesses, but also much responsibility when it comes to fulfilling the businesses’ obligations. Sometimes, whether through bad luck, a mistake, or other circumstances, a business finds itself in a situation in which it cannot realistically meet its obligations. It is in these situations that owners may contemplate filing a business bankruptcy case.
While many people worry about the stigma and reputational hit that may be associated with a Chapter 11 bankruptcy filing, there is another factor to take into consideration: potential loss of independence in running the business. As we have previously touched on, the decision to reorganize a business’ debts through a Chapter 11 case will likely subject the business’ operations to the scrutiny of the bankruptcy court. This is often done through the use of the creditor’s committee, in which some of the entities to which the business owes debts are given the role of overseeing the operations of the business and even investigating its procedures and personnel.
So, why would a Kentucky business owner subject him- or herself to this kind of loss of control? There could be several reasons. First, as most owners know, it takes a long time to build up a business’ brand or name recognition in order to be successful in the long term. Even if there are some short-term income issues, it may be more efficient for the business’ long-term health to go through the pain of reorganization, rather than starting over. Second, starting over may not be an option. Investment in businesses can be hard to come by, especially if there is a bankruptcy in the business owner’s past. Further, the law may or may not allow a new business to be started, if it is substantially similar to the old one, if the court believes it is simply attempting to avoid the consequences of bankruptcy.
Every situation is, of course, unique, and the facts of any individual Kentucky business’ circumstances will play heavily into the decisions that are best for that owner’s future. Those who want to know more about whether a Chapter 11 business bankruptcy might be a good fit for them may wish to consider consulting an experienced bankruptcy attorney.