Business owners work hard to maintain a successful business that profits. Running a business can be difficult and not always go as planned. If a business is struggling financially, an owner may have to look towards filing bankruptcy in order to guide their business out of hardships. When facing bankruptcy, it is important to seek an experienced attorney to provide you with your best option for your business.
Chapter 7 Business
When a business files for Chapter 7 Bankruptcy, also known as liquidation bankruptcy, it requires the business to liquidate its assets in order to pay any debts. This may be done if a business is not worth more than its outstanding debts. The business must file a petition providing all of their assets, liabilities, current income, expenditures, contracts and leases. A business may wish to file for Chapter 7 if their business is in one of the following situations:
- It has little to no potential of profit
- Its debts are worth more than its assets
- It is not possible to restructure debts
When Chapter 7 bankruptcy is successful, a business may be cleared of remaining unsecured debts. Unfortunately, in many cases, it results in the business closing.
Chapter 11 Business
When a business files for Chapter 11 Bankruptcy, they are allowed to remain open and running. This allows them to continue making income and keep employees on staff. With Chapter 11, the business creates a 5-year payment plan that allows them to restructure their debt and pay it over time. This is done under the protection of the Bankruptcy Court so that creditors and banks cannot shut the business down. When successful, the business will be able to make a profit again once their debt is paid off. If you are filing for Chapter 11, a petition must be filed including a list of assets, liabilities, and any outstanding contracts or leases.
If things are going wrong in a business and finances are not ideal, one may be quick to look towards filing for bankruptcy. While this may be tempting to protect your assets, it may not always be the necessary option for your business. It is possible that banks or creditors will work out a situation where your debts may be restructured and settled outside Bankruptcy Court. This allows a business to repay debts in a way that saves the company and its future.
When anyone files for bankruptcy, whether it may be consumer or business, the Bankruptcy Court enforces what is known as the “Automatic Stay.” The Automatic Stay forbids creditors from collecting any business assets. Collection activities may include lawsuits, calls/letters, bank restraints, or repossessions. Denying this gives the business some breathing room as they work to repay their debts. Certain benefits of the Automatic Stay are:
- It is filed immediately
- Collectors cannot pursue debts
- Prevents harassment
- Gives you room to breathe while recovering stability
Contact our Firm
If you or a family member is considering filing for bankruptcy and need the help of a skilled attorney, contact the Law Offices of Allen A. Kobler, Esq. today.
If you require the services of an experienced Business Law or Bankruptcy attorney, contact the Law Offices of Allen A. Kolber, Esq. today to schedule a consultation and discuss your options.