What is the difference between a Chapter 7 and Chapter 11 bankruptcy?
Businesses usually have a couple of choices when filing bankruptcy. Chapter 7 bankruptcy is reserved for those companies that are struggling so badly that they cannot remain in business. The business is usually liquidated, then all assets left over are distributed between shareholders and creditors.
On the other hand, a Chapter 11 bankruptcy is filed when the business owners want to continue doing business. This is typically referred to as reorganization bankruptcy, and the business owner is allowed to remain in business while in the bankruptcy process
What are the benefits of declaring bankruptcy for my business?
One of the most beneficial aspects of business bankruptcy is the fact that the assets of the company cannot be seized once your business enters the process. This is why this option is appealing to small and large businesses in serious financial trouble. Once the bankruptcy petition is filed, your business is under the protection offered by the US Bankruptcy Court.
What is a “discharge” in bankruptcy?
A “discharge” is a term used during the bankruptcy process that means a debt does not have to be repaid. When a debt is “discharged” not only does it not have to be repaid, the creditor cannot attempt to collect future payments from you. Not all debts are dischargeable. There are specific qualifications that must be met in order for certain debts to be discharged. You should consult a bankruptcy lawyer directly to determine if your debts are dischargeable.
What can be eligible for discharge under a Chapter 11?
Some dischargeable debts include: business loans, back rent, business-related credit card expenses, as well as other similar debts. Some debts that cannot be discharged include: taxes, penalties or fines that have been imposed on the company by the government, and salaries owed to employees.
Under a business bankruptcy, it’s important to note that personal expenses and debts may not be dischargeable – only expenses related to the actual business.
How difficult is it to file business bankruptcy?
Business bankruptcy can be difficult and complex. If you fail to disclose information or disregard an essential step, you can face serious charges and/or substantial loss. That’s why it is vital to hire an experienced bankruptcy lawyer to handle these types of cases.
