Some Pointers If You Must Go Bankrupt

With bankruptcies gaining in popularity during these hard times, knowing some pointers comes in handy.

The past year has seen some mega-failures, including Lehman Brothers, Circuit City, Tribune Co., and Pilgrim's Pride Corp. Yet some notable firms have survived banruptcy, such as Delta Airlines or are still operating with bankrtupcy protection, such as W.R. Grace & Co.

Brand name recognition helps big firms survive although bankrtupcy for more anonymous small businesses can prove lethal.

Some Pointers:

• Use bankruptcy as a last resort. No matter how much you aim to turn around a sick firm, your reputation will suffer.
• Smart timing. If you are in deep financial straits, consider filing for protection before your creditors sue you and force your hand.
• Get outside help with a reorganization plans. Typically, you have only 120 days to come up with one so stick to professionals.
• Consider how to get financing while bankrupt. Seek out Debtor-In-Possession financing to keep goods and cash flowing.
• Try to attract talent while bankrupt. You still need good employees, but be honest about your prospects with new hires and be flexible since you might get risk takers who don't mesh with business-as-usual types.
• Make sure you can meet payroll. If you have a large number of layoffs, you are legally bound to make their payroll for 60 days.
• Make sure you know the tax consequences.
• Hang tough for the long term. Recovery may take much longer than you thought.