Equipment Appraisal Blog | Understanding Machinery Appraisals

Declaring Bankruptcy: How an Equipment Valuation Improves the Situation

Posted by Equipment Appraisal Services on Tue, Mar 15, 2016 @ 01:30 PM


Ask any business owner, and they'll tell you that running a business is hard work. When faced with serious financial problems, however, many companies have to make a choice between different types of bankruptcy to get out from underneath the financial burdens of a failing business. Whether the business owner chooses to reorganize under Chapter 11 to try to save the business and turn it around or to completely shut it down under Chapter 7, this type of legal action gives the owner some breathing space to deal with the financial issues while still ensuring that the creditors will also get their fair share of what's left. But what part does equipment appraisals play in the process? Let's find out:

Bankruptcy Alternatives

But before you hire a lawyer and start filling out paperwork, it's important that you consider all the alternatives you have to bankruptcy. One of the first steps to take is to develop a solid set of books for your business, because it will tell you whether or not you need to file bankruptcy or which type you should file. If your accounting has fallen behind because of the problems you've been facing, you'll need to catch it up to ensure you're looking at the right figures. But don't just trust what your tax return says - most tax documents will depreciate your equipment's value on a standardized schedule. A quality equipment appraisal will allow you to determine the exact amount your assets are worth. If they're worth more than you had thought, you may be able to get a line of credit or make some changes to keep your business afloat.

Chapter 11 - Reorganization

If you think that with a little breathing room, you could turn your business around, filing for Chapter 11 could be a good alternative to completely giving up the business. During this type of reorganization process, the business' assets are placed into an estate or trust created by the court, with the business owner having the use of them during the reorganization period. This type of legal set up allows business owners to continue using the equipment for production while still ensuring that the interests of any creditors is also protected by removing legal ownership from the hands of the owner. If you have equipment that is being threatened with repossession which you either have equity in or need to continue production, this action can protect your use of the equipment.

Chapter 7 - Discharge of Debts

If you feel, even after looking at the updated books and machine valuation, that the business is simply not salvageable, a Chapter 7 filing may be the route to take. In this type of action, the business actions are discontinued and a trustee is appointed to ensure the business' assets are liquidated in an orderly fashion to pay any creditors. An accurate machinery valuation helps estimate the value of the machinery assets of your company, helping the trustee determine how much each creditor will receive.

Dealing with bankruptcy is a difficult time for business owners, but it's one that can be made lighter by hiring the right equipment appraiser. If you're still looking for the right company to provide your bankruptcy machine appraisal, please contact us today. At Equipment Appraisal Services, our experienced, certified machinery appraisers are ready to help you document the value of your assets with quality work and a solid methodology.

Tags: bankruptcy, Chapter 11, Chapter 7, Reorganization