No business owner wants to see their dreams go up in smoke there are many that face too much debt and not enough income. It can be due to poor business decisions, the market, and even early problems they weren’t financially prepared for. If there is no other way out you may want to consider one of the forms of bankruptcy to help you with your liabilities.
The process of obtaining bankruptcy for a business isn’t going to be easy. The laws are in place to ensure it can’t be used as an easy out for individuals or businesses. That can translate to it being beyond your reach but that isn’t necessarily true. Talk with an attorney who understands these laws so they can apply them directly to your circumstances.
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.
Many small businesses are able to file for Chapter 13 bankruptcy if they are able to reorganize. They can continue in business or they can close it but they will still be responsible for the debts incurred. They may be reduced to be more affordable and there is an extended period of repayment. Every effort is made to ensure they get a plan that works well for their budget so they can reasonably pay what is owed.
Chapter 11 is a common one as well for those companies who want a chance to get back on track. They can restructure what they have in place so they can continue the business. This could turn out to be profitable in the long run so many businesses give it a try instead of tossing in the towel. It can be hard to get credit though in such a situation as the bankruptcy will be there on the company credit report for at least 7 years.
The costs involved with filing for bankruptcy will vary. There are court mandated costs that have to be covered. There is also the cost of the lawyer. You want someone who knows what they are doing so it can be quite expensive. Make sure you discuss those fees up front so you understand what it is going to cost your business for the process.
It is wise for any type of business to avoid filing for bankruptcy if possible. Sometimes it is the best possible decision to make though based on the circumstances. The various options need to be discussed with professionals who can help you come to your decision. Should you decide bankruptcy is the way to go make sure you follow all of the regulations for it. The process isn’t easy but one that can be accomplished if done correctly.