Understanding Bankruptcy in Business

Posted: 01 Sep 2008 | Categories: Bankruptcy

When a business files bankruptcy it can be for one of two reasons. One, they actually mean to liquidate and close their doors or two, they are buying themselves more time with their creditors to be able to pay off existing debts.

This second types leads us to the first question of a business bankruptcy. Is the said business worth saving? A second question is can it be done?

Depending on the financial problems a company is having they could qualify for one of four Chapters of Bankruptcy. These are; Chapter 7, Chapter 11, Chapter 12, and Chapter 13. The causes of the financial troubles your business is having will ultimately determine which of these chapters you should file under.

Of these four possible Chapters of Bankruptcy, two of them are so limited for businesses let us start there. Chapters 12 and 13.

Chapter 12 Bankruptcy petitions are reserved for individuals or businesses that meet the definition of a Family Farmer or Family Fisherman as determined by the US Bankruptcy Courts.

Chapter 13 is only for small proprietary business owners. Therefore, most companies will have to file either a Chapter 7 or Chapter 11 Bankruptcy Petition.

Before you proceed in choosing the bankruptcy your business is going to file you need to know for your self;

1. Can the business succeed?
2. Can your business turn a profit if given ample time?
3. Given ample time and lower payments can you pay your existing debts while avoiding accumulation of new debts.

If you answered these yes, then your best bet is to file for reorganization or chapter 11. If your answers were no then chances are you need to liquidate and close the doors to your business or file for a Chapter 7 Types Of Bankruptcy.

What ever the situation warrants, be sure to secure yourself legal counsel and to be on top of the situation. You may have to start over from scratch but isn’t a fresh clean start better than staying so buried in debt? The choice is yours. Make it wisely.

You can also find more info on Types Of Bankruptcy. Bankruptcybliss.com is a comprehensive resource which provide information about Bankruptcy.

Tim_Wilson