As the number of companies filing bankruptcy continues to rise, so does the cost – especially for small business.  The cost of a Chapter 11 reorganization for a smaller company is nearly as much as for a larger company that has 10 times the revenue.  Ironically, most companies facing financial difficulty can’t even afford to file.  Instead, they often face business liquidation or hand the business over to the bank.

In this climate, the number of “prepackaged” bankruptcies has risen (less costly than a traditional bankruptcy, but still pricey) as well as the more affordable option of a “composition”. Both reduce time and cost.  The latter is better suited to small to mid-sized companies with a less complex capital and creditor structure.

A composition, which is a contract between a company and it’s creditors to modify debts, gives a much better payout to creditors.  Popular in the downturn of the 90’s, it is making a comeback as a more flexible, creative and streamlined option which can allow a company to overcome a financial or operation problem without burning most of the cash to pay for legal fees. 

Compositions are contracts that usually require agreement among all creditors.  This is where an intermediary offering commercial debt netotiation services is most valuable: professionals experienced in the art of reaching a win-win, amicable outcome for all parties.

There are times where a bankruptcy is a better or the only option.  Businesses need to do their homework to see if a composition is a viable alternative and then find a reputable business debt restructuring firm to help navigate through the process.