Does Chapter 11 Bankruptcy Preserve Your Credit Rating

It is a well-known fact that bankruptcy, or any form of debt relief, willaffect your credit rating for a varying amount of time. Whereas a debtsettlement will affect your credit rating only until the end of your repayment plan, the nature of a bankruptcy entails that it affects yourcredit rating for seven to ten years. Whether you file chapter 7 bankruptcy, chapter 11 bankruptcy or chapter 13 bankruptcy, you’re not the only party affected by it.Your creditors often lose a lot of money due to your inability to pay, or to pay on the previously agreed terms. It’s easy to see why creditorsrequire a good credit rating for anybody applying for a loan or credit, and why filing chapter 7 bankruptcy, chapter 11 bankruptcy or chapter 13 bankruptcy will make your low credit rating a risk for any lender. When it comes to chapter 11 bankruptcy, the situation and how it affects your credit rating is oftenvery complicated.
Chapter 11 bankruptcy is in nearly all cases filed by corporations who are in serious financial trouble. However, unlike chapter 7, chapter 11bankruptcy is not a liquidation. Rather, it can be seen as a financial rehabilitation process that chapter 11 bankruptcy court officials oversee and approve in order to allow the corporation to remain in business. A chapter 11 bankruptcy is a reorganization of a company’s assets and resources, and is geared towards making a company both profitable and solvent again.Obviously, when it comes to large financial transactions in return for products or services, the question of how a company’s credit rating is affected by a chapter 11 bankruptcy, follows different rules than those that apply to an individual consumer’s credit rating. No matter which part of the chapter 11 proceedings a company is in, it willneed cash to remain in business.More often than not, the trustee overseeing the chapter 11 bankruptcy proceedings will enable negotiations between a company and lenders to allow for the necessary credit. Ratings, in such cases, are usually less of an issue because the lender has the security of the company’s affairs being controlled by the trustee. If chapter 11 bankruptcy is an option you are considering and you are
concerned about your credit rating, you are best advised to seek quality financial advice, as well as retain the services of an experienced chapter 11 bankruptcy lawyer. Your chapter 11 bankruptcy lawyer can work with your financial advisor to construct the best possible reorganization plan, as well as negotiate with creditors and lenders before the chapter 11 bankruptcy filing to determine if it is at all possible to preserve your company’s credit rating.