Businesses can fail for many reasons, many of which are out of the owner’s control. Faced with mounting debt obligations, business owners may decide to file for bankruptcy protection.
What Is Business Bankruptcy?
Bankruptcy is a legal process designed to give people a fresh start through debt relief. For Smithfield businesses, there are two types of bankruptcy: Chapter 7 bankruptcy and Chapter 11 bankruptcy, which are described as either a liquidation of the business or a reorganization of the business.
Every business’s situation is different. To learn which form of bankruptcy is right for you and your family, you should speak with an experienced Smithfield business bankruptcy attorney.
Should I File Chapter 7 Bankruptcy For My Business?
If your business does not have a path forward, then Chapter 7 bankruptcy may be the best choice. This form of bankruptcy is often pursued when the debts of a business are so large that they cannot be restructured under Chapter 11.
If you file for Chapter 7 bankruptcy, the bankruptcy court will appoint a trustee to take possession of your business’s assets and use them to pay back your creditors. Once your creditors have received the assets, then your debts will be discharged, meaning that the owner of the business is released from any financial obligation for the business’s debts.
Chapter 7 bankruptcy is also the best option for businesses that do not have any substantial assets, such as a sole proprietorship. Partnerships and corporations, on the other hand, do not receive a discharge in Chapter 7 bankruptcy. In most cases, the business is dissolved under a Chapter 7 bankruptcy.
Should My Business Consider Chapter 11 Bankruptcy?
If your business has a chance of righting its course, then Chapter 11 may be a better choice for your business. Unlike Chapter 7 bankruptcy, where your assets are liquidated to pay your creditors, Chapter 11 provides businesses with a way to repay their debts while continuing to operate under a court-appointed trustee.
Under Chapter 13, the business must provide a detailed reorganization plan outlining how you will repay your creditors. The bankruptcy court will then review the plan and approve it.
Reorganization plans under Chapter 13 allow businesses to pay their creditors over a period of time, which could take over 20 years. It is important to note that reorganization plans take time to put into place, and not all succeed.
Hiring A Smithfield Business Bankruptcy Attorney
If you are considering filing for bankruptcy on behalf of your business in Smithfield, you need to speak with an experienced Smithfield business bankruptcy attorney. Contact our office today to speak with attorney David Mills to discuss your options and plan your path to relief from debt.