Business Bankruptcy Filing-What You Must Know

For any business already facing some serious debt, it goes without saying that bankruptcy filing is able to help reorganize debts to save businesses, wipe out business debts personal liability or liquidate businesses. To know a bankruptcy base is not really hard. As per the goals you have in place, bankruptcy filing can be accomplished by going for a business bankruptcy, personal bankruptcy or the two of them. As a business owner, there are options for bankruptcy that must be known in Chapters 13, 11 and 7.

Liability
It is not easy to know clearly the one liable for the company debts. For a general partner within a partnership or sole proprietor, it is worth noting you are liable on a personal level for your company’s obligations. It means if a business fails to pay all its glaring debts any creditor can come and take away personal property to cater for the debt. For a LLC, corporation or a limited partner, in most cases you are not responsible personally for the debts of the business. Creditors are only able to take away business assets. The only time you are in hot water is if you personally guaranteed or co-signed a debt.
Bankruptcy options
Chapters 13, 11 and 7 bankruptcies provide a small business with drawbacks and benefits on every level. The one that meets your needs highly depends on the debts that you might have, including the way your company has been set up. There are diverse options your small business has.
Chapter 7
This is a bankruptcy open to business and individual entities. In case you are an LLC, corporation or a partnership, filing for Chapter 7 bankruptcy can be done on behalf of the company. This chapter is mostly used to liquidate and shut down a business. After that, the business cannot make use of exemptions or receive discharges. Once the case has been filed, the assets are sold by bankruptcy trustees to pay every creditor. Chapter 7 is a good choice for a small business investor who has decided to close a business and hardly wants to be involved in selling the assets and engaging in creditor’s negotiation. Nonetheless, remember this chapter’s business bankruptcy hardly eliminates the personal obligations that exist on business debts.
Chapter 13
When it comes to a business entity, filing Chapter 13 bankruptcy is not possible. Nonetheless, a sole proprietor has a leeway because both the proprietor and the business are seen as the same entity. This means filing Chapter 13 has the effect of automatically including all the debts of a business within a bankruptcy. The design of the chapter 13 bankruptcy is meant to help keep assets while reorganizing the debts via repayment plans and a wonderful choice for sole proprietorships that own lots of properties.
Chapter 11
This is described as the reorganization bankruptcy for a business. It comes in handy for businesses wishing to go on working after the debts have been reorganized via an agreed repayment plan. Nonetheless, it is a complex and expensive bankruptcy and comes with extra requirements like filing operating reports that are ongoing, including appointing a committee of creditors. The creditors have to approve or vote for a plan prior to it being confirmed.
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