Equipment Appraisal Blog | Understanding Machinery Appraisals

Why You Need a Machine Appraisal for a Bankruptcy

Posted by Equipment Appraisal Services on Wed, Aug 26, 2015 @ 08:30 AM


Long days turn into sleepless nights when the business you own is in danger of failing. The thought of filing for bankruptcy is never a pleasant one, but it is an option that must be considered. Many manufacturing companies borrow heavily to obtain the machinery and equipment that is essential to the operation of their business. When business is good and everything goes according to plan, there is no problem servicing the debt. When debt goes from manageable to something worse, you can not procrastinate. It is time to act. It is time to call in a skilled equipment appraiser and get a bankruptcy asset appraisal.

Discharging or Reorganizing Debt Requires Proof

Whether you are planning to disband your business and file for a discharge of all debts under Chapter 7, or are trying to reorganize and resurrect your troubled business through a Chapter 11 filing, you need to establish your machinery and equipment values. One of the first and most basic steps in any bankruptcy filing is to list your assets (and liabilities) and indicate their estimated worth. If the bankruptcy court does not agree that your liabilities substantially exceed your assets, your case may be dismissed.

Get a Machinery and Equipment Appraisal Before you File for Bankruptcy

Before you go to the expense of hiring an attorney and filing a case, it makes sense to know exactly where you stand. Maybe you underestimated the fair market value of your machinery and equipment? Equipment value can be the biggest asset of your company.

If you lease the equipment and machinery that you use, it is not normally recorded as an asset of your business. If the lease contains a clause that allows you to purchase the equipment or machinery at a specific time for a specific price, the lease may have some value. Here is an example of how an equipment lease can have value.

Suppose you signed a 10-year-lease for machinery that cost $200,000. Further, your lease had an option to purchase the machinery for $20,000 at the end of the lease. When the lease is up, a machine appraiser may assign a machine valuation of $50,000. If that is the case, you have an asset worth $30,000.

Even if you are still paying the bank or finance company that loaned you the money to buy your equipment and machinery, you may still own a valuable asset. The difference between what you still owe to the finance company and the fair market value is the equity you have in your machinery or equipment.

Accurate equipment or machinery valuation can reveal a large, non-cash asset that can be used to borrow cash and pay off creditors. If you can use your machinery and equipment as collateral to raise working capital, you may be able to avoid bankruptcy and get your business back on track.

Equipment Appraisals Help Attorneys do their Job

Attorneys that practice bankruptcy law have a number or responsibilities that require an accurate estimate of a machine or piece of equipment's worth. Before you actually file a case they need to know all of your company's assets and liabilities so they can advise you whether or not it is prudent to pursue relief through the courts. Then, they have to prepare documentation (attach a machinery and equipment appraisal) for the court to review.

Business bankruptcies can be complicated and it always pays to be well prepared with facts an figures. Part of that preparation is getting your machinery and equipment professionally appraised.


Tags: bankruptcy, machine appraisal