There was a time that bankruptcy was considered a very touchy topic. However, as time flies, people became more aware of what business bankruptcy means, especially Chapter 11, which pertains to reorganization of the business. When a business finds it difficult to meet its financial obligations, a bankruptcy is almost certainly to follow. The required interest for the loans that the business needs to pay usually eats up the company’s revenues, thereby leaving the company financially distressed.
While there may be various business bankruptcy options available for a company, it is still important for a business to weigh these options first, before deciding on one. There is also a need for a bankruptcy attorney to be appointed by the company, one who is aware of the bankrupt laws that can be applied. In fact, bankruptcy lawyers can present the company with other feasible options, and not just bankruptcy.
The following are the different business bankruptcy options that are available for financially constrained businesses:
1. Chapter 7 - Liquidation. If the business does not see any hope in the future because of an unprofitable product line or lack of assets or impossible debt, then it must file for protection under Chapter 7. Chapter 7 is ideal for sole proprietors and small businesses, where the name of the business is directly connected to the name of the owner or owners. In this type of bankruptcy, business assets are sold and the proceeds from the sale are used to compensate creditors. Once the proceedings are over, the company would not exist anymore.
2. Chapter 11 - Reorganization. This is opted for by companies with potentials but are hounded by debts. This allows a company to reorganize the structure and the manner by which it performs operations, hence giving more time to the company to pay up its debt. The company needs to submit a reorganization plan together with its petition for bankruptcy, which must be approved by its creditors. If creditors approve the reorganization plan, then the company must comply with the terms in the plan. When the creditors are paid and the plan has been executed fully, then the debts of the company are eliminated.
3. Chapter 13 - Wage Earner Plan. It is referred to as wage earner's bankruptcy, and a sole proprietor who has mixed up his personal assets in his business, so he can gradually repay his debts from his wages. This Chapter helps protect the personal assets of sole proprietors.
4. Chapter12 - Family Fishermen Bankruptcy. Farmers and fishermen can seek protection from their creditors under Chapter 12 bankruptcy.
These are the various business bankruptcy alternatives that you can choose from. Businesses have to consider whether it would need liquidation or mere reorganization, take a look at secured debts, tally all their resources, and take time to ponder upon whether or not to hire a business bankruptcy lawyer to handle bankruptcy filing.
While there may be various business bankruptcy options available for a company, it is still important for a business to weigh these options first, before deciding on one. There is also a need for a bankruptcy attorney to be appointed by the company, one who is aware of the bankrupt laws that can be applied. In fact, bankruptcy lawyers can present the company with other feasible options, and not just bankruptcy.
The following are the different business bankruptcy options that are available for financially constrained businesses:
1. Chapter 7 - Liquidation. If the business does not see any hope in the future because of an unprofitable product line or lack of assets or impossible debt, then it must file for protection under Chapter 7. Chapter 7 is ideal for sole proprietors and small businesses, where the name of the business is directly connected to the name of the owner or owners. In this type of bankruptcy, business assets are sold and the proceeds from the sale are used to compensate creditors. Once the proceedings are over, the company would not exist anymore.
2. Chapter 11 - Reorganization. This is opted for by companies with potentials but are hounded by debts. This allows a company to reorganize the structure and the manner by which it performs operations, hence giving more time to the company to pay up its debt. The company needs to submit a reorganization plan together with its petition for bankruptcy, which must be approved by its creditors. If creditors approve the reorganization plan, then the company must comply with the terms in the plan. When the creditors are paid and the plan has been executed fully, then the debts of the company are eliminated.
3. Chapter 13 - Wage Earner Plan. It is referred to as wage earner's bankruptcy, and a sole proprietor who has mixed up his personal assets in his business, so he can gradually repay his debts from his wages. This Chapter helps protect the personal assets of sole proprietors.
4. Chapter12 - Family Fishermen Bankruptcy. Farmers and fishermen can seek protection from their creditors under Chapter 12 bankruptcy.
These are the various business bankruptcy alternatives that you can choose from. Businesses have to consider whether it would need liquidation or mere reorganization, take a look at secured debts, tally all their resources, and take time to ponder upon whether or not to hire a business bankruptcy lawyer to handle bankruptcy filing.
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