Builders Should Not Necessarily Ignore the Bankruptcy Option

2 min read

By Keat Foong, Executive Editor Washington, D.C.–Bankruptcy is definitely an option that builders should learn about even if they do not pursue it, according to the presenter at a recent seminar sponsored by Builder Partnerships. Jim Weigel, of The Shinn Group, a home builder consultant, was the presenter for the seminar entitled “Financial Impacts: Is […]

By Keat Foong, Executive Editor Washington, D.C.–Bankruptcy is definitely an option that builders should learn about even if they do not pursue it, according to the presenter at a recent seminar sponsored by Builder Partnerships. Jim Weigel, of The Shinn Group, a home builder consultant, was the presenter for the seminar entitled “Financial Impacts: Is Bankruptcy an Option?” According to Weigel, bankruptcy can be used not only to liquidate a business, pay off its creditors and shut it down, but also to ensure a business’s ability to survive, for example by providing it temporary relief from creditors. It can be used as a tool to cause creditors to enter a plan of action that allows the company to continue as a going concern. “That is the biggest reason most [companies] go into [bankruptcy],” he said. Big lenders, for example, understand that bankruptcy can delay them in obtaining their collateral. Most people have a fear of bankruptcy because it implies failure, Weigel acknowledges. But fewer than 1 percent of companies that consider it actually file for bankruptcy, he said. Weigel also noted that the impact of bankruptcy filing on sales in a weak market such as the current one is less than when times are good. Weigel said builders should at least meet with a bankruptcy attorney to explain the options, costs, pluses and minuses of bankruptcy. That is a one- or two-hour conversation that is probably the best money the builder will ever spend, he said. “The very first thing is to set up a meeting with an attorney and make sure you understand everything to know about bankruptcy,” he said. Subsequent steps the builder should take according to Weigel include: assess the current and anticipated situation; understand the real value of land; develop your financial analysis for each project, rolled into each bank and company; and provide regular, consistent information to all lenders.  

You May Also Like

The latest multifamily news, delivered every morning.


Latest Stories

Like what you're reading? Subscribe for free.