Bankruptcy is a word that strikes fear for individuals let alone for a business. It means that the business is suffering financially. It doesn't always mean that the business will be closing its doors though. It could mean they are going to take some time to reorganize. The corporate credit for any business that has filed for bankruptcy though can be severely scarred. It is important to understand how it will be affected before you file.
It isn't an easy decision to file for bankruptcy though and that is something people need to realize. The law doesn't make it easy for a business either so you can't do so in an effort to keep all the money you make and to run. There are various types of bankruptcy that a person can apply for. Understanding the basics should turn you to someone with more experience. They can help you with all the details of the process.
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Generally the category will be determined by the lawyer after a full assessment has been done. There are specific stipulations that have to be followed in order to file under a particular category. It also depends on how deep the financial problems run for the organization. Chapter 7 bankruptcy is the one that should be reserved only for the most serious cases.
Chapter 7 is the form that those businesses who no hope of recovery may need to file. This is generally for large businesses that have huge amounts of debt they need to get assistance with. Just because a company is bringing in large sums of income doesn't mean they are making money. Be prepared to provide detailed financial records though in order to get the courts to remove your unsecured debts.
Chapter 13 is often one that small businesses use as they don't have the high dollar amount of debt. This generally allows some of the debt to be forgiven. For the most part though it has to be repaid but in small payments that a person can make. Again, the specifics of it will depend on what the circumstances are. The business may or may not remain open with such bankruptcy being filed.
If the business, regardless of the size, intends to stay open then Chapter 11 may be the best solution. This involves the business being able to reorganize. Debts may be lowered but generally they are restructured to loosen up some money for the business. It can give it a second chance to really work. Creditors often go along with this too because they don't want to risk losing the money that is owed to them.
Filing for bankruptcy can result in your business credit being tarnished for at least the next 7 years. That is a red flag to creditors and so you may not be able to get any credit that you need as a result. You also need to understand you will need to pay various costs when you file for bankruptcy. These are on top of what you will be required to pay your attorney.
Never jump into such a decision though as it does seriously impact your business. Your credit will suffer and you may find it hard to make a profit at all afterwards. Yet if you are in a desperate situation bankruptcy can be the only option you have to give your business a chance to recuperate. This should all be evaluated in detail before a decision is made one way or the other.
Is Bankruptcy Right For You? Talk to Bankruptcy Attorneys Free and Confidential. Licensed bankruptcy attorneys are available. Attorneys will call you to discuss your case for free. Find out if bankruptcy is right for your situation.
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