There can be no doubt that these are very troubled times.  Here in Michigan, as well as most of the rest of the country, the economy is facing severe challenges and stresses that have not been seen in many years.  Although the Michigan auto companies were able to obtain emergency financing from the federal government, it is still unclear just how strong the financial position of any of these companies is.  As a result of these uncertainties, many Michigan businesses in the real estate sector are facing very tough decisions regarding their finances and future operations.

Even though no business manager likes to think about it, filing for bankruptcy can be an effective option for businesses that are facing severely challenging financial situations.  While bankruptcy is not the right decision for every business that is facing tough economic times, it is an option that should at least be considered in certain situations.  The most immediate benefit for a company that files for bankruptcy is the immediate relief that is obtained from (usually aggressive) creditors.  This relief is provided by the "automatic stay" that is implemented immediately when a bankruptcy is filed.

Generally speaking, there are two options for businesses when it comes to filing for bankruptcy: Chapter 11 and Chapter 7.  Chapter 11 and Chapter 7 are part of the United States Bankruptcy Code.  A Chapter 11 bankruptcy is basically a court-supervised reorganization, which allows a business to maintain the possession and use of its assets, propose a plan for restructuring its debts, and (hopefully) emerge from bankruptcy with its financial condition much improved so that it can competitively conduct business from that point on.  Filing for bankruptcy under Chapter 7 is a much more drastic option.  Typically, a Chapter 7 bankruptcy is sought only when a company's business problems are so severe that there is really no hope for recovery.  When a company files for a Chapter 7 bankruptcy, a trustee is appointed to oversee liquidation of the bankrupt company's assets and distribution of any proceeds to creditors.

Any business that is facing financial difficulties should consult with competent legal counsel for assistance in reviewing the available options.