How Business Bankruptcies Work
Bankruptcy often serves as a last resort for business owners, but it can also make a difference long before desperate measures are required. Business bankruptcy may be the best situation if your personal assets appear to be at risk.
In today's competitive market, even the most brilliant entrepreneurs may need to take drastic steps to preserve their financial health. Many look to bankruptcy as a viable solution but may be surprised to discover that this process can be very versatile and less complicated than they assumed..
Unsure whether bankruptcy is right for your company? Keep reading to learn how business bankruptcies work and how you can benefit from seeking legal guidance.
When to File for Business Bankruptcy
Bankruptcy often serves as a last resort for business owners, but it can also make a difference long before desperate measures are required. A lot depends on current debts, assets, and profit margins. Business bankruptcy may be the best situation if your personal assets appear to be at risk.
What Does the Bankruptcy Process Look Like for Businesses?
Your decision to move forward with bankruptcy may be guided by your ability to reorganize your debt — or your desire to liquidate and start fresh. How this process plays out will depend on whether you pursue one of these forms of business bankruptcies.
Common among sole proprietors, chapter 13 is often referred to as reorganization and/or a wage earner’ plan. Both solo entrepreneurs and ordinary individuals can expect to propose a payment plan to make installments to creditors over three to five years.
Available for sole proprietors, partners, and corporations, Chapter 7 is also known as liquidation. The process is guided by a court-appointed trustee, who takes possession of business assets and distributes them as needed among creditors. This approach can prove beneficial for those looking to shut down business operations for good while maintaining full transparency.
Similar to Chapter 13, Chapter 11 involves reorganization. In this situation, however, the entity at the center of the bankruptcy can be a sole proprietorship, a partnership, LLC, or corporation. This is the best option for business owners who believe they can realistically carry on without the need for complete liquidation. First, however, a reorganization plan must be developed, complete with intentions for discharging some debts and paying off creditors.
A new provision under Chapter 11 could deliver greater flexibility for small businesses. Known as Subchapter V, this may be a prudent option for business owners with less than $7,500,000 in non-contingent debt. This approach could also minimize administrative costs while allowing trustees — previously reserved for chapter 7 — to get involved.
Working With a Bankruptcy Attorney
Given the long-term implications of bankrupting your business, guidance is crucial. Without a skilled representative on your side, you risk agreeing to less-than-desirable arrangements with creditors. A proactive business bankruptcy attorney can provide customized intervention based on the current state of — and future plans for — your company.
To begin, your attorney will take a close look at the financial status of your business and opportunities for resolving your problems through reorganization or liquidation. From there, your attorney can prepare and file paperwork, attend creditor meetings, and appear in court on your behalf.
Whether you intend to file for business bankruptcy or are considering other options, don't move forward without a bankruptcy attorney on your side. The team at Schwartz Law is happy to help.
Schwartz Law works with chapter 11 bankruptcies in the Las Vegas area. If you need help with your chapter 11 business bankruptcy, then contact us online or call 702-385-5544 today.