How to buy a bankrupt company

business colleagues preparing for business meeting image by Vladimir Melnik from

Investors who desire to increase their holdings and generate more money may look to buy bankrupt companies, assuming they can get a good deal. Businesses go bankrupt for many reasons, including reckless spending, corruption or horrible financial management.

If you understand how to buy a lacklustre asset and turn it into revenue-generating machine, you may want to investigate buying a bankrupt company and working to turn it around.

Hire an attorney who specialises in the purchase of bankrupt companies. Contact the bar association in your area and ask it to refer an attorney who specialises in bankruptcy. This attorney needs to possess specialised certification, maintain membership in bankruptcy organisations and have at least 10 years of experience.

Ask your lawyer to set up face-to-face meetings with creditors to determine their level of flexibility when it comes to lowering debt. Since these creditors face the risk of not getting anything at all, they usually would rather get something as opposed to nothing for their efforts.

Communicate via your attorneys, because they have the task of trying to get the lowest possible settlement amounts from the bankrupt company's creditors. Note that attorneys with years of experience have an added advantage when it comes to negotiations because they have heard every type of possible argument or excuse a creditor can throw at them, and understand how to offer a rebuttal for almost any situation.

Speak with the bankruptcy judge and demonstrate that the price you desire to pay for the business is in accordance with a just distribution of funds. This just distribution of funds was put in place to ensure that one creditor doesn't take all a debtor's assets, but that the assets of the debtor get spread out evenly, so each person or company the person owes gets their fair share in accordance with the debtor's assets. Bankruptcy judges are appointed to the U.S. district court for a period of 14 years.

Present your written offer for the company via your attorney. When you come up with a written offer, consider the amount of money that's owed, number of other creditors that expect a payment, and the number of years you have to pay off the debt.

Hand your attorney a cashier's check for your deposit when the court accepts your bid. Allow the judge to issue his ruling on whether or not you met fair distribution rules. Then, gather the remaining funds you owe and purchase the bankrupt company.