Choose Receivership Over Bankruptcy

Foreclosure is never a pleasant experience for any business. If you own a restaurant, it means not only that your property is in danger, but your ability to dig back out of debt and turn a profit can be in trouble. Fortunately, there are foreclosure alternatives worth considering. If you are facing foreclosure, restaurant receivership is an option that can help ease the pain. In some cases, it can even give you the opportunity to get back up and running.

How Restaurant Receivership Works

If you are going into foreclosure, one risk you face is that of losing the business entirely. If your creditors take possession, they can start selling off assets to recover what you owe. It is a drastic remedy that protects lenders and leaves you as the borrower out in the cold.

Receivership is different, because it places the custodial responsibility of your business into the hands of a receiver. The receiver cannot have a prior business relationship with either you or the lender. Because the receiver is neutral, he or she has no incentive to push in your favor or the lender’s. The receiver’s job is to simply settle the accounts and debts in an equitable and fair manner without going through the expensive process of litigating it out.

Instead of turning your property over to a bank, receivership gives the benefit of an experienced manager. The receiver effectively manages the business and determines whether the business can be saved, or should be gradually wound down and operations ceased.

Receivership Encourages Settlement

For lenders, liquidating your restaurant is not the best scenario. They stand to gain more if your restaurant stays open, and can save significant legal costs by working with you instead of litigating against you. They want to be made whole, and going through a bankruptcy process usually does not give them the best way to do so.

For this reason, requesting a receiver can trigger a settlement from creditors. They see the benefit of having someone experienced in running a restaurant and protecting the value of your assets. Not every business can be saved, but this gives you and your creditors the best chance to get your restaurant back in the black. Settling with you can help you keep afloat and give creditors a better result than fighting through the bankruptcy usually gives. If the receiver can revive your business, everyone can win.

Receivership Protects Your Property

In a bankruptcy proceeding, it isn’t just your building that you lose. Assets like your fixtures and your cooking and processing equipment get stripped from the property and sold separately. Creditors can take possession of anything you have claimed as collateral on their loans, in the order of their priority in the proceeding. If you lose some of it, even if that eliminates your debt, it can be very difficult to get back up and running.

A receivership prevents the sell-off and protects your property. This reduces liability for all parties involved. The receiver assesses the value of what you own, and works to protect the value of your restaurant. If there are assets that are not adding to your value, the receiver can sell them. On the other hand, if the restaurant can gain more value in keeping them, the receiver will work to maximize the value of what you have and boost your revenues with what you have.

A Better Alternative to Foreclosure

Thus, if your business has a strong reputation and potential to earn money, restaurant receivership provides s a foreclosure alternative that may save the business. This may include new ownership or management, but it gives a way for you to recoup your investment and your creditors to get value for what they lent. You are in a difficult position when you face foreclosure, but receivership can give you a better path forward than losing everything.