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The Six Steps to Buying A Bankrupt Business
During difficult economic times, it's not uncommon to see a business forced to file for bankruptcy. True to the phrase, "one man's trash is another man's treasure" a change in ownership may breathe new life into a failing business.
Here are the six steps to follow when buying a bankrupt business.
1. Analyze the Business Data
Before you begin the process
of acquiring a bankrupt business, make sure to realistically evaluate
your potential investment. Review court documents to understand the
financial and operational obligations of the business you are
considering. Consider your ability to solve current
problems, reorganize assets, and get the business out of the red before
you commit to any decisions.
2. Hire a Bankruptcy Lawyer
Many lawyers specialize in a specific area of law. Be sure to hire someone that specializes in
buying bankrupt businesses, not just a general practicing attorney. The Federal Trade Commission (FTC) provides a
consumer guide that explains other important
information about hiring a lawyer.
3. Negotiate with Creditors
It is critical to meet with the business' creditors and understand their
flexibility in debt
reduction. When you meet, ask the creditors
for discounts or payment options to resolve unsettled debt. Creditors will approve the final settlement,
so it's important to understand their conditions before you invest more time or
money.
4. Make Your Case to the Judge
Meet with the judge handling your case and demonstrate to them that your offer
is reasonable. This step is key - the court
will not approve an offer that isn't considered a fair distribution of
payment.
5. Submit Your Bid and Deposit
Authorize your lawyer to submit an official written offer to acquire the bankrupt
business and a check for the deposit to the court. The judge will determine whether or not you have
met fair distribution requirements and render their decision.
6. Close the Deal
Mobilize your assets and prepare for acquisition so your deal can close as quickly
as possible.
Discuss Buying a Bankrupt Business in the Community
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JamieD
- Hello! My name is Jamie. I'm a consultant for the U.S. Government and have been supporting the Business Gateway program for the last year. I look forward to hearing the concerns and advice you all have to offer our small business community!
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BobK
- My name is Bob Keating. I'm a consultant working on the Business Gateway program for the U.S. Government. I provide product strategy and develop new features and content for the site. I am very interested in hearing your ideas about how Business.gov can better serve the needs of small business owners.
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