Running a business is hard enough, but when financial troubles come along, it can be downright impossible to keep things afloat. That's where bankruptcy comes in. Bankruptcy is a legal process that allows businesses to either restructure their debt or liquidate their assets to pay off creditors. There are several different types of bankruptcy, and which one is right for your business depends on a variety of factors. This article will discuss five of the most common types of bankruptcy services available to business owners.
1. Chapter 7: Liquidation
This type of bankruptcy is typically used by businesses that have no hope of reorganizing and repaying their debts. In a Chapter 7 bankruptcy, the court will appoint a trustee to oversee the liquidation of the business's assets. The proceeds from the sale of these assets are used to pay off creditors. After all debts have been paid, any remaining assets are distributed to the business's owners.
2. Chapter 11: Reorganization
Chapter 11 bankruptcy is typically used by businesses that are struggling but still have a chance of recovering and eventually repaying their debts. In a Chapter 11 bankruptcy, the business's assets are not liquidated. Instead, a reorganization plan is created that allows the business to restructure its debt and continue operating. The reorganization plan must be approved by the court and creditors before it can go into effect.
3. Chapter 15: Ancillary and Other Cross-Border Cases
Chapter 15 bankruptcy is used in situations where the debtor has assets or debts in more than one country. This type of bankruptcy is typically used by businesses with international operations. In a Chapter 15 bankruptcy, the business's assets are not liquidated. Instead, a reorganization plan is created that allows the business to restructure its debt and continue operating. The reorganization plan must be approved by the court and creditors before it can go into effect.
4. Bankruptcy Mediation
Bankruptcy mediation is a process that allows businesses and their creditors to negotiate a repayment plan outside of court. This can be a good option for businesses that are struggling but still have the ability to repay their debts over time. Mediation is typically less expensive and time-consuming than going through a formal bankruptcy proceeding.
5. Business Debt Relief
Business debt relief programs are available from certain government agencies and nonprofit organizations. These programs can help businesses with a variety of financial problems, including debt restructuring, asset liquidation, and business closure. It's important to note that not all businesses will qualify for debt relief, and there is no guarantee that you'll be able to get your debt completely forgiven.
Filing for bankruptcy is a difficult decision to make, but it may be the best option for your business if you're struggling to repay your debts. If you're considering filing for bankruptcy, be sure to speak with an experienced attorney who can help you choose the best option for your unique situation.
For more info about bankruptcy services, contact a local professional.