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Resolving Your Business Debt: Options in Corporate Bankruptcy

October 5th, 2009 |

Author: alexp

With the struggling economy and tight financial circumstances, more and more businesses are becoming burdened by unmanageable debt. If your company is financially stressed and can’t make ends meet anymore, one solution is corporate bankruptcy. Depending on your debt, creditors, corporate structure, and other circumstances, your business has several different options for filing bankruptcy. Each company will be affected differently by each type of bankruptcy filing. Below you’ll find a concise explanation of the different business bankruptcy options available. However, you’ll want to consult your bankruptcy attorney for additional information and specific advice.

Chapter 7—Bankruptcy Liquidation

Chapter 7 bankruptcy results in the closure and liquidation of your company. For corporations with insurmountable financial debts and for sole proprietorships, Chapter 7 bankruptcy filing can be the best resolution. The company’s assets are sold off to satisfy your creditors, and the business ceases operation.

Chapter 11—Bankruptcy Reorganization

Chapter 11 bankruptcy is most frequently utilized by large and medium-sized corporations. In the headlines recently with the publicity surrounding the Chrysler and GM bankruptcies, this type of bankruptcy focuses on the reorganization of the business. When a company files for Chapter 11 bankruptcy, the business continues operation while undergoing financial and structural reorganization. This type of bankruptcy can, but does not necessarily, involve selling off assets.

Chapter 12—Bankruptcy for Family Farmers and Fishers

Available only for family farming and fishing operations, Chapter 12 bankruptcy is a specialized option designed to assist these agricultural businesses.

Chapter 13—Wage-Earner Bankruptcy

Chapter 13 bankruptcy is actually a type of personal bankruptcy. Also available to sole proprietorship companies, Chapter 13 enables an individual to repay debt over a period of 3 to 5 years. Rather than liquefying assets to satisfy creditors, this type of bankruptcy allows the business owner to maintain ownership of assets. Instead, it creates a repayment schedule to pay debts over time, usually from an individual’s salary (thus wage-earner bankruptcy).

If your company is suffering in today’s down market, corporate bankruptcy is only one of the options for debt resolution. To help you make the right decision for your, be sure to consult an experienced bankruptcy lawyer.