You must ascertain a firm’s financial stability and credibility before entering into any business deal with it. That’s because the firm may have been involved in a bankruptcy in the past and if it has been, then your money can be at risk. It is important that you figure out whether the business you are dealing with has been involved in a Chapter 7 or Chapter 11 bankruptcy. To get this information, you must obtain business bankruptcy records.
Business bankruptcy records help you in the following ways:
If the firm is still alive and has sought protection under bankruptcy laws in the past, then it means that the firm had earlier sought protection under Chapter 11 bankruptcy laws. Chapter 11 bankruptcy allows a business more time to repay its debts. The business can continue to operate as usual during the bankruptcy process and after it repays its debts as per its reorganization plan, it becomes debt-free and comes out of the bankruptcy. Entering into a Chapter 11 bankruptcy may not be a red flag, but then checking business bankruptcy records can help you know whether the company has let down its creditors in the past. Such information and it’s recentness can help you make a decision whether to do business with the firm or not.
Business bankruptcy records also help you understand the case details and inform you whether the case is still open or whether the firm has been granted a discharge. If the Chapter 11 case is still open, then you must be wary and find out more before extending any credit. A firm that is experiencing the struggles of a bankruptcy process may continue repaying its old creditors that are part of the reorganization plan while stalling new creditors.
Another important piece of information you can get by sourcing business bankruptcy records is the names and addresses of debtors and a list of creditors. This information can help you dig deeper before entering into a business deal.
You must also obtain business bankruptcy records of subsidiaries that are or were associated with the firm with which you are entering into a business contract. It will help you fully understand the firm you are dealing with. If any of their subsidiaries have been involved in a Chapter 7 bankruptcy, then it raises a red flag. Chapter 7 means liquidation. When a firm files for protection under Chapter 7 of bankruptcy laws, it means that it does not see any future and wants to shut down. The court appoints a case trustee, determines the firm’s non-exempt assets, sells these, and pays off its creditors in order of their priority. So, if the firm with which you are dealing has subsidiaries or associate concerns that have filed for bankruptcy under Chapter 7, then you must be doubly careful before entering into any commitment.
This is how obtaining business bankruptcy records can help you enter into wholesome business deals.
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