Making the decision to file for bankruptcy isn’t one that businesses should make lightly. It can dramatically change your finances and keep you from being able to run your business the way you want to. That’s why it’s important to explore all other options before asking your Wisconsin business bankruptcy attorney to file your bankruptcy petition. So, what are the alternatives? Let’s take a look at some options worth considering.
Debt Settlement and Negotiation
One of the first avenues to explore is direct negotiation with your creditors. This involves contacting lenders, suppliers, or other parties who you owe money to and attempting to reach a new repayment agreement. Typically, this takes two forms:
- Debt settlement: Offering to pay a lump sum that is less than the total amount owed in exchange for the creditor forgiving the remaining balance.
- Restructured payment plans: Negotiating a more manageable payment schedule, potentially with reduced interest rates, waived fees, or lower payments to catch up on past-due amounts over time.
Creditors may be willing to work with you, especially if they believe it increases their chances of recovering at least some of the debt without going through the hassle of bankruptcy proceedings.
Chapter 128 Bankruptcy Alternative
Wisconsin offers a unique state-level alternative to federal bankruptcy known as a Chapter 128 proceeding. This alternative is a voluntary debt consolidation plan filed in Wisconsin circuit court. Here’s how it works:
- You file a petition listing your debts.
- You propose a plan to repay those debts, typically over the next three years.
- If approved, you make regular payments to a court-appointed trustee.
- The trustee distributes the funds to your listed creditors.
Chapter 128 can be faster and less expensive than federal bankruptcy. This means you could get your finances back on track in less time.
Taking Out Small Business Loans
If your business is still relatively profitable but you’re just tight on cash this quarter, filing for bankruptcy could derail your profitability and keep you from growing the way you want. That’s where small business loans can help. These loans give you access to cash at reasonable rates to help you through those tight financial periods.
Keep in mind that taking on new loans is something you should only do if you’re confident that you can afford to repay the loan in full. If the loan would put you in a tighter financial position or keep you from making ends meet, filing for bankruptcy may be a better choice.
Refinancing Existing Loans
Refinancing involves replacing one or more existing loans with a new loan, ideally with better terms. You may be able to lock in a lower interest rate, reduce monthly payments by extending the repayment term, or consolidate multiple debts into a single payment.
This can free up your cash flow and help you get your finances back on track.
Filing for Bankruptcy May Still Be Best
These alternatives can be a good choice for many businesses, but they’re not perfect for every situation. Sometimes, bankruptcy is the best or only viable solution for businesses with more debt than they can manage. It might be time to consider bankruptcy if:
- Your total debt load is simply too large to manage through negotiation, Chapter 128, or refinancing.
- Your creditors are taking actions like lawsuits, liens, or property seizures that alternatives can’t stop.
- Attempts at debt settlement or restructuring have failed.
If you’re considering bankruptcy, the best thing to do is to schedule a consultation with an experienced Wisconsin business bankruptcy attorney. They’ll help you explore your options and figure out if filing for bankruptcy truly is the right fit.
Speak With a Wisconsin Business Bankruptcy Attorney
At Kerkman & Dunn, our team has helped business owners learn more about their options and take the necessary steps to file bankruptcy for years. Contact our team today to speak with a Wisconsin business bankruptcy attorney.
