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Bankruptcy Proceedings. Choose the right path!

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  2. Bankruptcy Proceedings. Choose the right path!

On numerous occasions business people don’t know exactly where they are and can’t find the help and advice they need. The lawyer is always very busy, the broker agent is someone from all their life and the situation is getting worse. The result is that businessmen try to direct themselves as best they can without really knowing where the path leads and how to get out of the situation.

The road is, more or less, always similar. Companies that have not re-structured in time or even those that have re-structured find that the crisis, worse than they thought, has dried up all their reserves.

The first step in this situation is always that in view of the financial difficulties the credit lines on behalf of the banks are closed and a temporary collapse of the liquid assets is produced. The response to this situation is non-payment to suppliers and public bodies. This temporary respite seems to allow the company to float again and to improve so as to face up to unpaid debts. But generally the bottom of the matter is poor management.

Because of this, in view of the lack of adequate management, non-payments become lawsuits, which include lack of income to civil services. At the next moment, comes strangulation, which is when creditors as well as authorities seize client’s overdue payment accounts, which in terms of a businessman is like a new non-payment and this means less liquid assets. Difficulties with paying salaries follow together with the start of labour problems which all hinder the small amount of productivity and scarce sales as well as new orders. All this is combined with consequent court expenses.

And so typical and commonplace business strategies are used to avoid these debts … until all of these become a mess and a possible crime of fraudulent conveyance … when the company is exhausted, only then do they think about something called bankruptcy proceedings.  But what for?  With lost clients, with workers wanting to make claims to FOGASA (Wage Guarantee Fund) and unemployment benefits , with the suppliers we have left …. Yes, I know, so as to avoid responsibility …

Before exhausting its resources, good advice would have been pointed out to the company to call a creditors meeting. This path, taken from the start, would have allowed liquid assets to be maintained (legal form of payments is suspended) which would have avoided the embargo of client’s payments which would have made the company’s liquid assets healthier. Good management of staff in this situation is important. In this area, generally, specialist business lawyers and bankruptcy management come in who set a firmer course and take those drastic decisions which the businessmen because of ignorance or other reasons have not dared to take.

It’s not a magical cure and the creditor’s meeting road doesn’t always work out well. And it certainly has its costs. But it does try to keep the company afloat responding to orders. But it’s much better to try to plug the leaks with sound judgment and definite direction than to put pieces together for one more day without knowing where you’re going.

See you later!

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