Trying to run a business is never an easy task. But the recent economic times have made this task remarkably more difficult. It does not take many missed or late payments before creditors begin harassing a business for money owed to them. In many cases, the best way to get a business turned around and out of trouble is to file for business bankruptcy.
A California-based electric car company filed for Chapter 11 protection recently. The company, CODA Holdings, filed after poor sales. They intend to get out of the auto business permanently with this filing. The company says that it will focus post-bankruptcy efforts on an energy storage business that is also under the CODA name and uses similar technology.
At the moment, a group of debtors plans to buy the company for $25 million. The company is only four years old and only has about 40 employees.
CODA is not the first electric car company to struggle financially. Only last month, an Anaheim based company laid off almost 75 percent of their work force. This company makes electric sports cars. Another company, Tesla, has yet to make a profit and the company owes the government almost $500 million in loans.
Filing for bankruptcy can put an automatic stay on creditor actions. This includes repossessions and foreclosures. Bankruptcy can allow a business time to reorganize and reduce or eliminate penalties and fees.
Companies in any type of business can experience financial difficulty. Whether due to market changes or other commercial factors, business owners in such situations should explore the possibility of chapter 11 filing, to determine if it can help save the company.
Source: The Sacramento Bee, "Electric car maker CODA files for Chapter 11," Robert Jablon, My 1, 2013