Chapter 7 Information Chapter 11 Information Chapter 13 Information Filing Personal Bankruptcy Filing Business Bankruptcy
What is Business Bankruptcy?
Business bankruptcy is a legal procedure in which a business
declares that is unable to pay its outstanding debts to its creditors. There are
several reasons as to why a business might need to file for bankruptcy. The most
common reason is an excessive amount of credit problems tied to the particular
business. This problem may arise because the business is mismanaged or it is not
selling a product or service that is profitable. Whatever the reason for the
large amount of debt, the business cannot continue on the current course. If you
are the owner of a business suffering from unmanageable debt, then you need to
find a solution to this problem as soon as possible.
Bankruptcy should be the last resort because it is the most damaging option. It
will relieve your obligations to your creditors but when bankruptcy is filed, it
is very difficult to bring a business back to a normal operation level. Most
creditors would also prefer that you did not file for bankruptcy because that
would mean that they would get little or none of their money back. Therefore, it
is in the best interest of your creditors to organize a new payment plan with
you so that you are able to pay them back and keep your business afloat.
If you have exhausted all other options and determined that bankruptcy is the
only choice left, then you can file for either Chapter 7 (liquidation) or
Chapter 11 (reorganization) bankruptcy. Chapter 7 bankruptcy means that the
court takes control of your business' assets, sells them, and repays your
creditors from the proceeds. It is very difficult to resurrect your business
after Chapter 7 bankruptcy because you are forced to start over with nothing and
you have a black mark on your credit report. Chapter 11 bankruptcy allows you to
continue operating your business but a trustee of the bankruptcy court oversees
all financial transactions and puts together a repayment plan that will enable
you to pay off your creditors.
Most businesses will try to file for Chapter 11 bankruptcy first because it
allows them to control the business and continue its normal operations. It is
also an opportunity to return the business to profitability; however, it is more
common for a business to liquidate even after attempting to reorganize.
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