Businesses have the option to file bankruptcy under either a Chapter 7 or a Chapter 11. A Chapter 7 filing is best suited for those businesses who plan on closing their doors, whereas a Chapter 11 Bankruptcy permits management and owners of a company to reorganize their debt while still operating.
CHAPTER 7 BUSINESS BANKRUPTCY
If a business files under a Chapter 7 bankruptcy, the court appoints a trustee to take charge of debtor’s business. The trustee is charged with selling off the non-exempt assets of the business and using the proceeds of the sale to pay creditors in order of priority.
Some of the benefits of a business filing under the Chapter 7 code include:
- It avoids litigation.
- Protects exempt assets.
- Wipes out all of the business debt.
CHAPTER 11 BUSINESS BANKRUPTCY
A Chapter 11 Bankruptcy is suited for those businesses who are struggling with debt, but are still viable to continue operating. It will give business owners a chance to reorganize their debt, and if approved, repay it over a period of time. If your business has fallen behind in income or property tax, is in arrears with vendors or is facing difficulty in keep up with rent and lease obligations, a Chapter 11 Bankruptcy might be the best option for you.
Some of the benefits of a Chapter 11 filing include:
- It allows the business to repay debt over a 6-year period.
- It halts all collection activities and law suits.
- May reduce or eliminate tax penalties.
- Business owners may be released from certain lease agreements.
- It provides Debtors In Possession which guarantees payment to new lenders.
If you are business owner and are considering filing business bankruptcy, it is recommended that you consult with an attorney to determine which option is best for your business. To get in touch with an experienced attorney, please call 888-433-8444.