Getting Through Business Bankruptcy
Companies that face insurmountable financial hardships, such as overwhelming debts, may choose to file for business bankruptcy. This option isn’t appropriate for everyone, however.
The success of a bankruptcy filing depends on many factors. Issues like the legal form of the business you’re running, your personal liabilities, the nature of your debts and your plans for the future all play vital roles. Here are some basics you should be aware of.
What Is Business Bankruptcy?
Business bankruptcy usually comes in one of two forms:
- Chapter 7: This liquidation filing places an automatic hold on collections. A trustee is appointed to sell off your non-exempt assets to repay creditors.
- Chapter 11: These filings let entities and individuals restructure their finances in accordance with a bankruptcy-court-approved reorganization plan.
Reorganization vs. Liquidation
Different plans serve unique purposes. Reorganization-oriented filings might support sustained operations by making cash more readily available, but they can limit your options for years while you’re in repayment. Liquidations give you a fresh fiscal start by eliminating outstanding debts as quickly as possible, but many force your company to close.
How Will Filing Affect Your Business?
Business bankruptcy often seems like it might provide significant debt relief. Many people are fooled into believing it’s some kind of free pass, but it has serious ramifications for you, your employees and your futures.
Filing successfully doesn’t eliminate your personal responsibility or debt. At best, it only places these obligations on hold. While you may escape being individually held liable, you might have to relinquish control or shutter your doors entirely.
How Can Protection Legal Group Help?
At Protection Legal Group, we have decades of combined experience helping businesses safely navigate these tricky waters. We can help you evaluate your options so that your insolvency doesn’t trap you in an unfavorable bankruptcy situation. To learn more about alternatives like debt restructuring and other solutions, reach out now.