Business Bankruptcy – What Is Business Bankruptcy?
Business bankruptcy is one of the most popular debt relief strategies available for small, mid-size and large businesses. There are two types of business bankruptcy available: Chapter 7 and Chapter 11 with a Chapter 11 being the most complex of the two. A Chapter 11 bankruptcy is mostly suited for those companies that are facing temporary hardship. It gives them an opportunity to restructure their debt while still maintaining control of the daily operations. However, there are certain activities that require court approval while businesses are in a Chapter 11 bankruptcy. These include the sale of major assets, altering any rental any rental or lease agreements or making any major financial decisions.
When you file a Chapter 11 bankruptcy, you have to include a repayment plan that indicates how priority creditors will be paid off. Chapter 11 payment plans can be complicated so it is advisable to seek out the help of an experienced business bankruptcy lawyer.
For those businesses that wish to liquidate and wind down, a Chapter 7 bankruptcy is more effective. During a Chapter 7 business bankruptcy, the trustee sells the assets of the business and use the proceeds of the sale to pay off creditors. There is no bankruptcy discharge and debtors may not exercise any exemptions. In some circumstances it may make sense for this business owner to file a personal Chapter 7 bankruptcy particularly if the business owner co-signed or personally guaranteed any business loans.
An attractive feature about filing a business bankruptcy is the Automatic Stay. This provision in bankruptcy law prevents creditors from engaging in any collection activities including lawsuits. A business bankruptcy gives business owners to manage their finances and not worry about about creditors closing in on them. If a business bankruptcy is not the right approach for you, there are many other debt relief strategies that may work for you. Speak with one of our experienced business debt relief lawyers to determine if bankruptcy is the right choice for you.