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Bankruptcy is feared, unanticipated, and frustrating for any business owner. When it\u2019s looming over your head, it\u2019s important to know all ins and outs of the process. While bankruptcy is not a death sentence for your business, it\u2019s could be harmful.<\/span><\/p>\n Learning all you can about what happens when a business goes bankrupt can help you avoid unfortunate mistakes and prepare for the future. In this article, we\u2019ll share information about what to expect from business bankruptcy.<\/span><\/p>\n When a business is in a poor financial situation, owners can<\/span> file for Chapter 7, 11 or 13 bankruptcy<\/span><\/a>. The Chapter you choose depends on how bad the debt level is and what your plans for the future are. When you file for Chapter 7, the business will likely be liquidated while assets shared by the creditors.<\/span><\/p>\n If you file for Chapter 11 or 13 bankruptcy, you can hope for the reorganization of debts. In such a case, the business can continue working. According to an expert <\/span>business broker, Cress Diglio<\/span><\/a>, it\u2019s even possible to sell a company that has filed for Chapter 11 or 13 bankruptcy.<\/span><\/p>\n When the word bankruptcy first appears on the horizon, it could seem like the end of the world. The entire process is scary and complex. That\u2019s why business owners opt for professional assistance. A bankruptcy attorney could help you deal with the situation in the most efficient way possible.<\/span><\/p>\n If you feel as if the company is failing, bankruptcy could be a solution it needs at the moment. Business bankruptcy is designed to help companies that experience debt problems. Instead of viewing it as something fearful, consider bankruptcy as an assistant. However, it comes with several serious consequences, one of which could be a high cost. That\u2019s why a decision to file should never be made lightly.<\/span><\/p>\n Overall, bankruptcy could help your company stay afloat when all else seems to fail. Some business owners decide to file for bankruptcy to get out of a sinking debt situation and start anew.<\/span><\/p>\n The bankruptcy filing process, as well as the outcome, depend on the type of bankruptcy. You need to carefully consider all the pros and cons of each type, including costs, consequences, and opportunities.<\/span><\/p>\n Let\u2019s take a closer look at each bankruptcy type:<\/span><\/p>\n Chapter 7 bankruptcy can be considered when it\u2019s obvious that a company doesn\u2019t have a future. The decision whether it\u2019s obvious or not shouldn\u2019t be made solely by the business owner. Professional financial and legal advice is necessary to get a clear picture of perspectives.<\/span><\/p>\n Business owners tend to choose this bankruptcy type when they are overwhelmed with debts to a point where reorganization and restructuring don\u2019t appear practical.<\/span><\/p>\n Chapter 7 bankruptcy could be a good choice for a company without large assets. Small companies are likelier to choose it than larger enterprises since they don\u2019t have that much to lose.<\/span><\/p>\n When you choose Chapter 7 bankruptcy, the court appoints a trustee, who takes full possession of all the company\u2019s assets and distributes them to the creditors to cover your debts as much as possible. After that\u2019s done, the business owner is released of all debts, and the company usually stops functioning.<\/span><\/p>\n If you hope to solve your company\u2019s problem and get a fresh start, but debts are overwhelming you, consider Chapter 11 bankruptcy. When you file for this bankruptcy type, the court appoints a trustee, who assists with the company\u2019s reorganization. In some cases, this trustee could be the business owner.<\/span><\/p>\n If you want to deal with your debts by using this bankruptcy tool, you need to present a detailed plan of reorganization that involves working out current debts. If the court and creditors accept the plan, you can start taking advantage of it without the debts looming over you.<\/span><\/p>\n The key takeaway from Chapter 11 bankruptcy is your ability to extend the debt payments over a substantial period of time. Not all bankruptcies filed under Chapter 11 achieve the desired results due to their complexity. Eventually, some owners may resort to Chapter 7.<\/span><\/p>\n This bankruptcy type is used by sole proprietorships. It\u2019s somewhat similar to Chapter 11 because it involves creating a debt repayment plan.<\/span><\/p>\n The amount you would need to repay when filing for Chapter 13 depends on how much you earn and the property you own. In case your personal assets are involved as business assets, you could avoid losing them by choosing Chapter 13 bankruptcy over Chapter 7 bankruptcy.<\/span><\/p>\n When selecting the right type of bankruptcy to file for, it\u2019s important to consult financial and legal advisors. In some cases, it\u2019s possible to avoid filing altogether.<\/span><\/p>\n Once you decide that bankruptcy is the only way to proceed and choose the type to go for, it\u2019s easy to start. Businesses need an attorney to file for bankruptcy. While sole proprietors can do it on their own, legal advice is recommended.<\/span><\/p>\nWhat is Business Bankruptcy?<\/span><\/h2>\n
3 Types of Business Bankruptcy<\/span><\/h2>\n
\u00a0<\/span>Chapter 7 Bankruptcy<\/b><\/h3>\n
Chapter 11 Bankruptcy<\/b><\/h3>\n
Chapter 13 Bankruptcy<\/b><\/h3>\n
How Does the Bankruptcy Process Happen?<\/span><\/h2>\n