Business bankruptcy may provide the flexibility an organization requires to rebuild after a financial downturn. Bankruptcy proceedings can also help eliminate financial obligations during the wind-down process before organizational dissolution.
Business bankruptcy can help company owners renegotiate financial obligations with creditors and discharge certain eligible debts. One of the biggest sources of financial pressure on any business is the recurring cost for business space. How does an organizational bankruptcy help address a commercial lease?
Business owners have options
Federal bankruptcy regulations address not just debts eligible for discharge but also contracts that create ongoing financial obligations. Executory contracts are often a focal point during the early stages of a business bankruptcy.
There are several different forms of relief available, each of which can be valuable in different circumstances. It is possible to use bankruptcy as a means of terminating an ongoing business lease. Landlords who might otherwise intend to enforce the terms of a lease may need to release a business tenant from their obligation to continue paying rent.
Businesses can also potentially work with their landlords to assign their leases to outside parties. By letting someone else assume the lease, the business eliminates its financial obligations without depriving the landlord of rental income.
Finally, businesses attempting to restructure can also potentially reaffirm the lease during the bankruptcy. They may work with the landlord to address any challenges created by past-due rent payments or other lease-related issues.
Reviewing the company’s financial obligations and major contracts, including commercial leases, with a business bankruptcy attorney can help ensure an organization derives optimum benefit from the bankruptcy process. Legal representation makes it easier to understand the options available during bankruptcy and to negotiate with creditors, landlords and other interested parties effectively.