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The Six Steps to Buying A Bankrupt Business

by NicoleD, Former Moderator

  • Created: August 18, 2009, 8:37 pm
  • Updated: February 16, 2011, 1:24 pm
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4 comments

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

Message Edited by JamieD on 09-01-2009 12:29 PM

Tags: Community Blogs, Small Business Cents

Comments

fileforbk | Window Shopper | 10/27/2012 - 8:23 pm

Seems like buying a bankrupt business is a high risk, high reward type
situation. But with some practice, I'm sure it can be extremely profitable.
Professional Web Site: fileforbk

melissamartone | Window Shopper | 3/1/2010 - 4:13 am

Thanks for sharing your views on the topic. It makes one think and look the other side of the story. lace wedding dresses ---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices.
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collany | Performer | 9/7/2009 - 8:32 am

Don't you think so buying bankrupt business might be risky or costly, such deal need to take very carefully and tough to finding out such deals but here you given very clever idea to us.
Professional Web Site: http://www.collanykey.com

hardwood | Creator | 8/29/2009 - 10:34 am

Is there a website that list these companies that filed for bankrupty? I only follow companies locally and may miss a chance to get offer to purchase a company that may be 4 states way that falls into my niche. thanks, dyuane Message Edited by NicoleD on 09-01-2009 05:40 PM
Professional Web Site: http://www.palmettohardwood.com