USA Today reported that Oreck, Corp. recently filed for Chapter 11 bankruptcy protection. You know Oreck as the manufacturer of upright vacuum cleaners and various household cleaning products.
The intention of Oreck in filing the Chapter 11 was to use the bankruptcy as a tool to facilitate a sale of the company. The Chapter 11 will buy some time for Oreck to sell without continued harassment and collections from its creditors. It also may allow Oreck to eliminate much of its debt through the sale.
It may come as a surprise to many small business owners that selling your business through a Chapter 11 bankruptcy proceeding can be an extremely effective way to accomplish that goal. This method of sale can be quite beneficial to both the buyer and the seller. A company that is “under water” with respect to its liabilities can benefit from a bankruptcy sale by allowing the company to shed much of its debt through the sale process, while often allowing the owners (or shareholders) to preserve some of the proceeds of the sale which would otherwise go to creditors. The buyer benefits by inheriting a company with a manageable amount of debt on its books, which greatly increases the likelihood of future profits. Most importantly, it buys time for the seller to negotiate a sale without the collections of its creditors interrupting the process
Your business is probably not close to the size of Oreck, Corp. However, the strategy that Oreck employed when it filed for Chapter 11 bankruptcy protection can often be used by small business owners as well. If you are the owner of a small business that has substantial debt and are looking to sell, call our office to find out the benefits that a sale through a Chapter 11 bankruptcy proceeding can offer.