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What Each Person Should Know About Bankruptcy


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There are two categories of bankruptcy. They are business bankruptcy if debts have grown out of commercial activity or bankruptcy of consumers if debts were result of noncommercial activity as purchase of the goods. Businessmen should understand what bankruptcy is and why it happens and to make efforts that their own companies have not appeared among people filing for bankruptcy. In case bankruptcy nevertheless happens businessmen should understand what bankruptcy means and what possibilities they have to meet crisis. It is necessary for each businessman.

In addition to direct bankruptcies in the result of which the business is closed and the property is sold there are also options of reorganization. In this case business or the physical person make the offer to the creditors with the request for change of structure of their debts and reorganization of financial activity.

Both bankruptcy and the reorganization is the result of a financial disbalance. High level of bankruptcies last years shows that owners of business should pay more attention to the financial affairs.

There are several reasons of bankruptcies of the companies.
Bankruptcies happen when the company does not possess cash. More precisely the accessible cash is insufficient to cover their debts and creditors do not wish to wait for payment for a long time.
In certain cases the problem is connected with a cash stream. The company receives the cash income, makes sale but sale does not bring the income sufficient to satisfy impatient creditors. In such cases, the company stops the activity for some time while new managing directors will reorganize work, and the cash stream is restored.

Much more serious problem arises in case the company is incapable to remain in the market. If the company is incapable to struggle with competitors, market conditions change, sales fall in this case all basis of the company stops working. If it occurs no reorganization will rescue the business. If creditors notice it they understand that the longer they wait lower is the possibility to return the loans. In that case, the initiative can proceed from creditors who can demand the executive powers to suspended company activity to list its property and distribute the money among those to whom the company owes money.

What are the first signs of the bankruptcy ?
The small-scale business is especially vulnerable from outside possible financial crash. Because of its size it has no resources and reserves with which help it is possible to survive in short-term or long-term crisis. On the other hand well operated business without dependence from the size can take steps for protection against sudden changes in surrounding conditions. For the businessman it is very important to know warning signals of approaching financial danger. So there are some of the dangerous signals. They are small reserves of cash, increase of expenses, too high loans, delay with payments, falling of sales, sale only for support of a stream of a cash,
low self-estimation.

It’s very important for each businessman to realize the importance of this signals and it’s very important for each person to see them approaching.

Almost all of us still remember the times when it was possible to buy a thing even if one hadn’t got enough money. Credit was a simple way out. No wonder that today many of those who hunted for a loan, are searching for how to avoid bankruptcy.

People who happened to get into the condition when they owe more money than they have, definitely have to search for ways to avoid bankruptcy.

Being in such condition it is wise to use any ways to get over it. Avail yourself of such great chance as the web technologies. Using them at full capacity could give great results. Working with search engines, forums, social networks,web sites one can learn lots of tips to avoid bankruptcy and a great deal of other relevant info. Also signing up for RSS feed on this blog will help to be aware of new publications and tips on the topic.

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Comments

  1. Indeed, a majority of bankruptcies happen because of the lack of cash for everyday operations. In every business Cash is King…Many people make the mistake of just worrying about the starting capital without realizing that they also need cash while the business is running.

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