Chapter 11 is a wonderful tool to restructure an overleveraged business. It’s a way to significantly reduce debt and save a company. However, you company has to have strong fundamental practices to succeed in chapter 11. You must have a good handle on your finances, understand your market and business and, above all, have positive cash flow. If you can’t make a profit before you pay your debts, then Chapter 11 will not save your company.
Before considering a chapter 11, you have to ask yourself if your customers will continue to do business with you while in chapter 11.
We know airline customer don’t seem to care, as people fly on airlines during bankruptcy all the time. However I have also see instances where customers of computer resellers immediately cease to do business the moment a chapter 11 is filed. All businesses are different and you must critically analyze the market’s anticipated response before you file.