Business Bankruptcy and the Possible Complications
Please note the below information is on business bankruptcy. Personal bankruptcy and individuals that are self-employed will likely have much different results.
No one likes to admit defeat but if you are running a business and your debt far outweighs your potential income, you may not have any choice but to consider filing bankruptcy. There are many challenges involved in a business bankruptcy filing and it is imperative that you understand the various chapters and the implications of each.
Chapter 7 Bankruptcy
When filing Chapter 7, all assets are liquidated and to the extent there are funds available, creditors are paid off. Remaining creditors debt is excused and will show up on your credit report as part of your bankruptcy as unpaid.
It is important to note that there is a difference for personal chapter 7. In a personal chapter 7, you will likely keep all your assets and not repay any debt.
A business chapter 7 will likely be a means to wind up the corporation. However, if you are a small business or a service provider, such as a contractor, lawyer, accountant, and so on, you will continue your business as you did before.
Chapter 11 - Reorganization
Unless a company is suffering financially due to fraud or mismanagement, filing a Chapter 11 bankruptcy would not result in a trustee appointment. The filing is available for all types of business entities and allows you to create a payment plan to repay outstanding debts. However, in most cases, the limit is five years to repay although a company may request an extended payment plan depending on specific circumstances. For small businesses, there is a cap on debt of $2,490,925 which is subject to modification from time to time depending on the laws.
Filing a business bankruptcy is time consuming, can be expensive and can be very confusing given all the rules that one must apply. If your business is not taking in sufficient revenue to meet your financial obligations and you need help with the bankruptcy process, contact the Law Office of Robert Kovacs for help. We will work with you to evaluate your individual circumstances and help you determine if filing bankruptcy is your best option and if so, which chapter would be most appropriate.