Your business isn't doing very well, you have more debt than you can or want to pay off, and you are thinking it's time to close shop and move on. But you don't want to move on, saddled with debt or the loans or obligations that your business owes.
What About Bankruptcy?
Of course, one option may be bankruptcy, but you really don't want that on your credit (even if the business' bankruptcy is not, technically, your bankruptcy). Do you have other options? It turns out that you do.
Read on as the Chicago commercial litigation attorney at Ellis Legal explains more on this below.
Sell on Your Own
One obvious option is just to sell your business' stuff (inventory, machinery, computers, etc.) and pay off your creditors with the proceeds of the sale(s).
But that's tougher than it sounds. You aren't in the business of selling stuff. If you own a printing press, you may know how to make shirts and printed materials, but that doesn't mean you know how to value or market the actual press that you're using.
Additionally, should you have a problem—say, a buyer of something you sold is unhappy with the purchase—you could have more legal issues in the form of lawsuits.
Assignment for the Benefit of Creditors
There is another option, called an assignment, for the benefit of creditors (ABC). Instead of you selling everything that your business owns to pay off debt, you are assigning everything that you own to a separate company that sells what you owe.
There are a number of benefits to this. The first is that companies that handle ABCs have special knowledge in various industries and know how to market and value your property to help you get top dollar for your assets, which will, in turn, make it more likely that you will be able to pay off the debt that you owe.
The ABC companies also may have relationships already with many of your creditors, which trust them, making them more likely to wait until assets are sold before they come collecting on any debt.
The other benefit is ease—you assign the property, let someone else do the work, and move on with your life.
They Take Debt, Also
In many cases, you won't just assign the assets of your company to the ABC companies—they also will accept your liabilities or debts. That means that even if the property you own doesn't pay off all of your liabilities, you still walk away debt free, the same as you might with a bankruptcy. There is no risk of selling everything the business owns and still having to owe money to accreditors.
There is only one advantage to bankruptcy over an ABC, in most cases: personal liability. If you took out a debt for the business in your own name, personally, the proceeds from what the ABC company sells won't go towards that debt.
Looking to wind down a business? Let us help you with the legal issues to let you get the fresh start you need. Speak with a Chicago, IL, commercial litigation attorney at Ellis Legal at (312) 967-7629 today.