Two construction companies that have been struggling financially for some time have filed for bankruptcy, according to business news. Both companies filed for Chapter 7 bankruptcy in U.S. Bankruptcy Court in the month of August. Connecticut business owners will recognize this as being an intelligent and prescient financial move on the part of both businesses, as Chapter 7 bankruptcy can help to ease the burden of debt for struggling companies.
According to reports, the first company filed on Aug. 28 after listing nearly $2.6 million in debts against $673,000 in assets. These assets are largely tied to a claim they filed against a contractor back in 2016. The bulk of the company's liabilities stem from a disputed performance bond claim worth some $1.8 million.
The second company filed a few days later on Aug. 31. The company, which provides home renovation and custom building services, listed just over $1 million in debt against only $162,000 in assets. The debt is divided among some 50 creditors, many of which are unsecured. This means that debt owed to these creditors could be forgiven by the bankruptcy court should the assets prove to be insufficient to pay down the debt.
Some Connecticut residents might think of Chapter 7 bankruptcy as a business failure, since it is predominantly perceived that way in popular media. However, the reverse is true - a bankruptcy filing can help to clear existing debt from a company's ledgers, either by paying down creditors with liquidated assets or by having some of those debts forgiven. In either case, the company's leadership can emerge more financially stable and able to re-enter the open market.
Source: richmondbizsense.com, "Local construction companies file Chapter 7", Michael Schwartz, Sept. 18, 2017