For a small business owner considering a business bankruptcy, it is often difficult to distinguish where one’s business life stops and one’s personal finances begin. It is imperative, in bankruptcy, to determine whether the liabilities lie with the business, the individual, or both. In some situations, it is necessary for the business and the individual to file bankruptcy. A competent attorney will analyze these factors and direct you to the best debt relief solution.
Once a bankruptcy is filed for the business, both the lender(s) and debtor have limitations on what they are allowed to do. The business owner is forbidden from transferring or selling assets and the business creditors are forbidden from collecting on the outstanding debts. Subsequent to the filing, the assets of the business will be sold by the bankruptcy trustee and the secured creditors will receive a preferential payment over the unsecured creditors. It is important to note that corporations, LLCs, S-Corps and the like, will not get a discharge in bankruptcy.
Types of Business Bankruptcy
There are two type of bankruptcy chapters available for a business debtor
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. The trustee has two primary responsibilities. The first is the liquidation of the assets of the company and the second is to disburse the proceeds from the liquidation of the assets among the eligible creditors. The filing of the chapter 7 bankruptcytakes less time and is much less expensive that filing a chapter 11 bankruptcy. 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 a chapter 11 business bankruptcy is much more complex than filing a chapter 7. While liquidation is the primary focus of chapter 7, reorganization of the business is the objective of chapter 11 bankruptcy. Filing under chapter 11 really has two purposes. The first is to restructure the business to allow it to survive bankruptcy and continue operating once it emerges from bankruptcy. The second purpose is to permit the business to operate in such a way that the debts are repaid by the revenues generated. Just like chapter 7, the trustee appointed by the court will supervise the process.
Let the Law Office of Matthew C. Swanson Help You Today
If you are contemplating a business bankruptcy, you can’t afford to pass up a free consultation about filing a business bankruptcy with an experienced attorney. Contact Attorney Swanson today.
The Law Office of Matthew C. Swanson services all of Plymouth County, Bristol County, Norfolk County, and Barnstable County.