You started your business to provide for your family, create new jobs and deliver services and products your community needs. But even great businesses sometimes experience financial difficulties. Business bankruptcy does not always mean the end of a business venture, and in many cases, can help business owners move forward. It really depends on which type of bankruptcy your business decides to file.
Business bankruptcy can be categorized as either a liquidation or a reorganization. Chapter 7 bankruptcies are typically categorized as a liquidation, where property is sold in order to repay debts. Chapter 13 bankruptcies, on the other hand, are categorized as reorganization, meaning that the business will be able to keep its property, but it must commit to a repayment plan over the course of a number of years.
We help businesses file either Chapter 7 bankruptcy for Chapter 13 bankruptcy, both of which can create an automatic pause on collection activities by your business’s creditors.
Is Chapter 7 Bankruptcy Right For My Business?
In a Chapter 7 bankruptcy, property is sold to repay creditors. When a business files Chapter 7 bankruptcy, a trustee is appointed to take the property. Approximately twenty to forty days after filing the bankruptcy petition, you must attend the "first meeting of creditors.” The trustee will then ask you questions about your company's assets and liabilities, and its income and expenses. Your creditors will also have the ability to attend the meeting and ask questions about the company's finances.
If your company does not have any assets, the bankruptcy case will end in about three or four months. If your company does have assets, the case will end after the trustee sells your business assets and distributes the proceeds to your creditors.
What Are The Benefits Of Chapter 11 Bankruptcy?
If you decide to file Chapter 11 bankruptcy for your business, your company will become a "debtor in possession." The company will have the ability to keep its property and continue operating. As opposed to Chapter 7 cases, trustees are not usually appointed in Chapter 11 bankruptcy cases. However, there will be a meeting of the creditors where a trustee and your creditors will have the opportunity to review your company’s financial condition.
A "creditor's committee" may be created, which would consists of your company's largest unsecured creditors. This committee will investigate your conduct and financial condition, and participate in the creation of the reorganization plan.
Plans of reorganization outline how a company will deal with its creditors. Creditors may be divided into classes, and each class of creditors must accept the plan as it applies to that class. Unlike consumer Chapter 11 cases, business bankruptcy repayment plans may provide for payments to creditors over any reasonable period of time, which could extend well beyond three to five years.
Next Steps For Your Business
Whether your company is filing for bankruptcy under Chapter 7 or Chapter 11, or your business needs an experienced bankruptcy attorney to guide you through the process. Use the number below to call our office and set up a time to speak with our attorneys David Mills and Patty Mallory.