What should a company do if it cannot pay all of its debts?

When a company finds itself in a position where it cannot pay all of its debts, filing for bankruptcy is a structured legal approach that allows the company to address its financial troubles. Bankruptcy provides a way for the company to reorganize its debts or liquidate its assets under the protection of the court. This process enables the business to either create a plan to repay its creditors over time or, in the case of liquidation, to sell off its assets to pay debts while protecting its remaining assets from creditor claims.

Choosing to file for bankruptcy brings with it the opportunity to operate under a court-supervised plan. This plan can potentially keep the business viable while ensuring that creditors are treated fairly according to the legal framework established by bankruptcy law. It is a meaningful step to take in order to resolve severe financial stress and offers a path toward either rehabilitation or an orderly dissolution while minimizing damage to stakeholders.

Increasing revenue can be an ideal goal for a company; however, it may not be immediate or sufficient as a standalone solution to the problem of insolvency. Seeking insolvency itself is not a proactive step that a company would take, as it is a state rather than an action. Avoiding disclosure of financial woes may bring temporary relief from pressure but ultimately leads to more dire consequences