How To File Bankruptcy For Your Business, Partnership Or Sole Proprietorship

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Many businesses are facing difficult times. Loans have become remarkable harder to procure. Your customer base may have slowed down dramatically. Financial cut backs have been done as much as possible. As a business owner you may have face the reality that income is not meeting expenses and there is not a possibility of future improvement.. Bankruptcy may be the only way to restructured or save your credit. There are two options available, Chapter 11 bankruptcy, Chapter 7, or Chapter 13 bankruptcy proceeding.

Chapter 11 Bankruptcy is filed for those businesses that would like to remain viable but want to force creditors to reorganize their debt. In this type of bankruptcy the debtor, or business filing, Once the filing is done, creditors will be notified and committee will be formed to represent the interest of the creditors. The plan must be approved by the court. This filing can be complicated so a attorney is recommended. After 120 days, creditors can enter a proposed plan, if one is not implemented. Just like with other bankruptcy cases, a motion of stay is ordered. This ceases any collection efforts by creditors. The trustee will review the bankruptcy to make determined the right filing has been done. If the trustee discovers that the bankruptcy qualifies as a Chapter 7 or 13, it can be converted. If the Chapter 11 filing is correct, you business can be allowed to continue to function as it restructures. A Chapter 11 does not require the companies assets to be liquidated, instead the company’s financial health is overseen by the trustee. A Chapter 11 filing does require the votes of the creditors.

Chapter 7 Bankruptcy is suitable for companies who are so far in debt that reorganization is not possible. This bankruptcy allows for the liquidation of assets to payoff credits. The assets are sold off to pay the creditors. Those creditors that have secured debt, will have the asset returned to them, while those with unsecured debt would have to file a claim and hope there are funds left over to received some repayment. When a business files for Chapter 7, the company will cease operations.

It is important to realize that not all debt can be discharged in a business bankruptcy. Debts such as taxes owed to local state, federal or government agencies, debt that was not listed, debts acquired after bankruptcy and more. It is critical to consult with your attorney to form distinct that all the paperwork filed is correct. Do not mislead or attempt to hide information from the bankruptcy court. The penalties are severe, could include fines and possible jail time.

Filing bankruptcy will affect your business. First, all your creditors who are listed in the bankruptcy filing will be contacted. They will be notified depending on your type of bankruptcy filing, whether they will receive payments, assets returned or a settlement offer. Accountants and your attorneys, will receive administrative claims, which means they will have priority on being paid first.

Making the decision to file bankruptcy is not a easy one. But in today’s economy, it is not unexpected that more and more businesses will have to access this option. Depending on the filing you do, bankruptcy can help to salvage your business. A Chapter 11 gives you the opportunity to work with your creditors to remain operational and to rehabilitate your business. There are two other options but they are limited. Chapter 13 can be used for sole proprietorships and partnerships if the amount of secured debt is less than $1,010,650 or unsecured debt is less than $336,900 according to www.moranlaw.net . If you are a family farm business you can file under Chapter 12. Again, consult with your legal counsel to see which bankruptcy meets your needs and what actions can be taken after the filing.