How to Restructure Business Debt

The economy has hit millions of businesses extremely hard. Many of these businesses are struggling to survive and may not be able to make payments to their employees. Thankfully, there are a number of different methods that businesses can use in order to restructure their business debt. Many of these methods may be known to these businesses, however, some of these methods may not be known.

First, many businesses end declaring bankruptcy in order to restructure their business. Chapter 13 and Chapter 11 bankruptcy are the two types of business bankruptcy. Businesses are required by law to either liquidate or file plans with the court on how they will handle the restructuring of their debt. The business must file a step by step plan that is approved by the court and then follow their plan with court supervision.

Some businesses choose to issue more shares of stock in order to generate capital for their business. The generation of capital can help a business to pay down debt, purchase new equipment and any other use the business sees fit. There are several downsides to issuing stock. First, businesses may see a reduction in their equity as well as a decreased value of their stock. Stock ownership also decreases ownership control of the business.

Many businesses also have a large amount of unsecured debt. Unsecured debt is any debt that does not have collateral tied to it. The outstanding debt that a business has that remains unsecured can be discharged during bankruptcy. However, it will be extremely difficult for a business to gain business credit cards in the future. Also, the discharge of the business credit cards may harm the business owners personal credit. When businesses want to reduce credit card debt, they should pursue several options before bankruptcy. For example, businesses should consider paying down the debt, contacting the credit card company to make a settlement or to transfer the balance to a lower interest credit card.

Restructuring business debt may sound difficult. However, there are a variety of options available for businesses. A business needs to carefully consider their options as well as review any negative and positive results that can happen when they restructure business debt.