Small Business Bankruptcy Filing Help

For a small business owner it is often difficult to distinguish where one’s business life stops and one’s personal finances begin. Bankruptcy of a small business can often mean that the individuals involved in the business may have to declare bankruptcy as well. The decision can be whether it is more effective to file business bankruptcy or personal bankruptcy. A competent bankruptcy attorney can work with you to show you what works best in your circumstances. Often a Chapter 7 personal bankruptcy is also an effective bankruptcy tool for a small business where the owner’s financial interests are intertwined with the business.

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Filing Small Business Bankruptcy:

The business owner or the businesses creditors can initiate filing business bankruptcy. Once bankruptcy is filed, both the lender(s) and the debtor have limitations on what they can and cannot do. The business owner can neither transfer nor sell the assets. The lenders and creditors have to stop trying to collect their debts.

Once a small business has entered into bankruptcy filings, the secured creditors have preferential payment over the unsecured creditors. The collateral in the business is used to pay off debts. If this amount is insufficient to accomplish this, the remaining secured debt is put in the category with all the unsecured debts such as utility bills and credit cards.

Two Types of Business Bankruptcy: Chapter 7 and Chapter 11

According to business bankruptcy laws there are two kinds of filings; one is Chapter 7 the other is chapter 11. Either of these can be used for small business bankruptcy.

Chapter 7 Bankruptcy

Among the business bankruptcy options, the most popular is the chapter 7 bankruptcy. Upon successfully filing for bankruptcy, the bankruptcy court appoints a trustee. This trustee is entrusted with dual responsibilities. The first is the liquidation of the non-exempted assets of the company and the second responsibility is to disburse the proceeds from the liquidation of the assets among the eligible lenders. The filing of chapter 7 bankruptcy takes less time and is generally much less expensive than the alternate business bankruptcy which is Chapter 11. A Chapter 7 business bankruptcy is generally a good choice for small businesses where the owner’s personal finances are significantly impacted.

Chapter 11 Bankruptcy

Filing business bankruptcy chapter 11 is more complex than chapter 7. While liquidation is the primary focus of chapter 7, rehabilitation or reorganization of the business is the objective of chapter 11 bankruptcy. Filing chapter 11 bankruptcy has dual purposes. The first goal is to restructure the business to allow it to survive bankruptcy and continue to operate once it emerges from bankruptcy. . The second goal is to permit the business to operate in such a way that the debts are repaid by the revenues generated. A famous example of this is the recent bankruptcy of General Motors which has emerged from Chapter 11 and is more profitable than ever. Just like chapter 7, the trustee appointed by the bankruptcy court supervises the process.

Which one is better? Chapter 7 or Chapter 11

It all depends on the intent of the debtor whether to opt for chapter 7 or chapter 11 bankruptcy. If it appears the best solution is to liquidate the business, chapter 7 is designed to accomplish this. If the business is looking to restructure and continue on in its business, chapter 11 will help accomplish this objective. This also depends on the business bankruptcy law. Filing Chapter 7 is applying for fast relief from debt through liquidation of non-exempted assets of the company. On the other hand, filing chapter 11 bankruptcy is paying the debts over an extended period of time through restructuring the business. Thus, Chapter 7 is focused on the short term while chapter 11 bankruptcy is relief from debt over an extended period of time.

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How we can help in Filing Business Bankruptcy

Attorneys in the BankruptcyOnly network help you

• Determine the documentation needed for filing business bankruptcy
• Review all the relevant business bankruptcy information available for a small business
• Increase the possibility of success
• Reduce the mental and physical stress to file documents systematically
• Professionally present your case before the bankruptcy court
• Be aware of the latest changes in business bankruptcy law
• Stop the collection calls from creditors or collection agencies