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Filing for bankruptcy can sometimes help a business stay afloat. In certain cases, filing for bankruptcy can sometimes help a business not only survive, but thrive. If you are looking to file for business bankruptcy, the type of bankruptcy you choose will largely depend on the type of business you own, the configuration of the business, the assets involved, and the amount of revenue available for a payment plan.
Is a business bankruptcy right for you? Consider the following factors:
A Chapter 7 form of bankruptcy is a straight form of liquidation, often used for Sole Proprietors. Nearly all of a petitioner’s assets will be surrendered for a liquidation and distribution purposes. This, however, will not include non-exempt assets such a person’s primary home and vehicle. All funds made from the liquidation of assets will be divided among all creditors, who will receive priority on the funds based on the rules and regulations established by the United States Bankruptcy Code.
Chapter 11 bankruptcy allows businesses to reorganize their debt to help them be able to afford to pay back their creditors. It is typically used for Limited Liability Companies, Corporations and Partnerships. During Chapter 11 bankruptcy, the business continues to operate. However, the bankruptcy court will have control of any major decisions regarding the business during the bankruptcy process. If a Chapter 11 reorganization does not work, the case is generally either dismissed or the business is liquidated via a Chapter 7 bankruptcy.
Chapter 13 bankruptcy enables people that are self-employed or otherwise managing an unincorporated business to seek debt relief while protecting valuable assets. Corporations and partnerships are not eligible for Chapter 13 protection. People who file Chapter 13 are usually high-income earners and/or have valuable property and other high-priced items they do not want liquidated as part of a bankruptcy. Chapter 13 gives people the opportunity to have debt relief, agreeing to an affordable repayment plan that allows them to repay their creditors over three to five years.
You should seek a business bankruptcy attorney near you to determine the type of bankruptcy your business qualifies for and to start this legal process.
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