Bankruptcy V. Self-Liquidation
When a business decides to cease operation and file for bankruptcy, everything stops until any interested party gets relief from the stay through the court, and this can take weeks (or months). The interested parties are typically the secured creditors but may include the business’s landlord(s) and unsecured creditors as well. All during the time to get relief from the court, all calls to customers and collections must stop.
A Trustee is appointed from the court who will oversee the bankruptcy process. While the Trustee is supposed to be focused on what’s in the best interest of the creditors, in reality, the Trustee may have their own agenda and not be aware of the time sensitivity in liquidating certain parts of the business assets.
The secured creditors typically want to liquidate as quickly as possible to enhance the return on the assets as the more time goes by, the harder it becomes to collect outstanding accounts receivable and liquidate any remaining viable inventory. And you, as business owner, lose complete control over everything. All in all, a very ineffective process.
A better alternative is to self-liquidate or self-liquidate to a point, then file bankruptcy. When our clients call us for help liquidating, we advise them to jump on collections before broadcasting they’re going out of business. Most of the time, it’s best to get the senior lender out of the way then file bankruptcy.
We also ask our clients what personal guarantees they have because filing bankruptcy does not protect business owners from creditors going after them personally. If you want to control the process, pay off who you want and better protect yourself personally, it’s often better to start with self-liquidation.
About Celtic Capital
Companies looking for working capital to cover operating expenses, fund growth, increase buying power and take advantage of vendor discounts and rebates turn to Celtic Capital. With an appetite for the more complex transactions, Celtic Capital has a history of success in crafting creative, flexible asset based financing solutions from $500,000 to $5 million with no financial covenants.
As an independent lender, working with companies nationwide, Celtic Capital is willing and able to alter price and deal structure and expand lines of credit to handle its clients’ increased revenues; and when cash flow is an issue, will look toward providing an inventory facility to help offset lost cash flow.