Business bankruptcies are no less emotionally and psychologically taxing than personal ones. Many would see this as evidence that their company has failed. It’s best to take your time while making an emotional decision so you don’t miss anything or make a mistake that makes things more complicated.
In this article, we’ll go over some of the things you need to know before your company decides to file for bankruptcy. To help you better manage the bankruptcy process, we will also go through the actions required to file a bankruptcy for your business, as well as frequent pitfalls that businesses make when filing for bankruptcy.
In most cases, a company has a choice between three distinct forms of bankruptcy. These are:
If you want to shut down your company, you need apply for Chapter 7 bankruptcy. In this process, the company’s assets are sold off to satisfy as much of the debt as feasible owing to the company’s creditors.
If you wish to rebuild your company and keep operating, Chapter 11 bankruptcy is the right choice for you. It entails reorganizing your debts so that you can pay them and getting rid of the ones you can’t. In contrast to a Chapter 7 liquidation, your business would continue to function as the restructured entity.
Reorganizing a sole proprietorship is possible in Chapter 13 bankruptcy. Chapter 13 bankruptcies are often used by individuals to discharge consumer debt, although a sole proprietor can file for Chapter 13 under specific conditions. Chapter 13 bankruptcy allows you to reorganize your debt into manageable monthly payments and minimize your overall debt load.
However, there are some debts that must be paid in bankruptcy and cannot be dismissed. Before filing for bankruptcy, you should find out if your debt will be discharged or if you will still be responsible for making payments from future revenue. You should consult a bankruptcy attorney if you have questions about whether certain debts will be discharged in Chapter 7, Chapter 11, or Chapter 13 bankruptcy.
Depending on the form of bankruptcy that best fits your company’s needs, several procedures may need to be followed. Hiring an attorney to assist you in determining what paperwork must be filed is a good idea. This being said, the fundamental procedures for a company filing for bankruptcy are as follows:
There are several errors that could make the procedure more difficult than it needs to be. These include….
A bankruptcy lawyer can provide advice tailored to the situation and help clients understand the serious repercussions of not disclosing information.