Business bankruptcy can be a helpful way to reorganize debts and get your business back on its feet. When debts prevent your business from going to the next level, a business bankruptcy may be the best option for you. There are three primary types of bankruptcy that a business can take advantage of. The best option for a business depends on the unique circumstances involved. Here’s what you should know about business bankruptcy from our Las Vegas bankruptcy lawyers.
Can a Business File for Bankruptcy?
Yes, a business can file for bankruptcy. The options that a company has to file depend on the structure of the business. Some options allow the business to discharge its debts completely. Other options allow a business to restructure its debts and make manageable payments. As long as the business meets the qualifications and follows the conditions of filing, a company can file for bankruptcy.
What Is Chapter 7 Bankruptcy for Business?
Chapter 7 bankruptcy for business is the way to cease operations and distribute assets to creditors. For sole proprietors, the business closes, and the debts are discharged. For corporations and partnerships, assets are distributed to creditors, but unpaid debts may still exist. Chapter 7 bankruptcy for business is one way to liquidate a company. Whether it’s best for your business depends on your unique circumstances.
Can an LLC Declare Bankruptcy?
Yes, an LLC can declare bankruptcy. An LLC can choose to liquidate its assets and close the business or restructure their debts and use a payment plan to continue in operation. Chapter 7, Chapter 11, and Chapter 13 bankruptcies are all available to businesses. Each type of bankruptcy has advantages and drawbacks for an LLC. You should choose the best type of filing for your LLC.
What Happens When a Business Files Bankruptcy?
What happens when a business files bankruptcy is that the court appoints a trustee to oversee business assets. The trustee takes an inventory of assets and liabilities. In Chapter 11 and Chapter 13 business bankruptcy filings, the business continues to operate while making monthly payments. In Chapter 7 bankruptcy, what happens is that the trustee liquidates the assets and distributes the funds to creditors before the business closes.
What Happens When a Business Files Chapter 7?
What happens when a business files Chapter 7 is that the business no longer operates. The assets are sold and distributed to creditors. In Chapter 7 for a sole proprietor, the business owner is no longer liable for the debts of the business. In all cases where a business files Chapter 7, the business goes out of business.
Can I Keep My Business If I File Chapter 13?
Yes, you can keep your business if you file Chapter 13. In fact, Chapter 13 bankruptcy is the appropriate type of filing if you want to continue to operate your business. Under a Chapter 13 filing, you make monthly payments towards your debts. Your company continues to operate while you make payments over a period of time.
Types of Business Bankruptcies
There are four types of business bankruptcies. One type applies only to family-owned farms, so for most business owners, there are three types of business bankruptcy. There are different standards for a business to qualify for each type of bankruptcy. One type closes the business while the other two types keep the business in operation. Here are the types of business bankruptcies:
Chapter 7 Business Bankruptcy
If there’s no path out of debt and the business wants to shut down, Chapter 7 may be the best option. In a Chapter 7 filing, assets are liquidated and given to creditors. There’s a trustee that oversees the distribution process. Once the trustee collects and liquidates the assets, the business closes. A sole proprietor that files for Chapter 7 can receive a complete discharge of their debts. A partnership or a corporation Chapter 7 filing may not result in a complete release of remaining debts.
Chapter 7 is a good option for a sole proprietor who doesn’t have many personal assets. There are exemptions for the property that you can keep. The exemptions are substantial. There are some circumstances where personal liability might result from a partnership or LLC filing. It’s important to talk about your options with an experienced attorney for business bankruptcies.
Chapter 11 Business Bankruptcy
A Chapter 11 bankruptcy for business is a way to continue the business in operation. The trustee creates a plan for the business address creditors. The business pays the creditors over time. The period of time to pay creditors may be 20 years or more.
A Chapter 11 business bankruptcy results in the business making monthly payments to creditors. The payments are less than the overall amount owed. The benefit to the creditors is that they get to recover something instead of just waiting to collect anything at all. Chapter 11 is a viable option for a business that has regular income and a path to turn things around.
Chapter 13 Business Bankruptcy
A person who is a sole proprietor can use a Chapter 13 filing for business bankruptcy. The filing allows the business to make monthly payments that ultimately results in manageable debt resolution. There are reasons that a sole proprietor might prefer a Chapter 13 filing instead of a Chapter 7 filing. For example, there may be less risk of losing certain personal assets, like a home, in a Chapter 13 filing.
The term of payments is typically shorter in a Chapter 13 filing compared to a Chapter 11 filing. You may be able to complete your payments in as little as three to five years. There are some types of debt that you can’t discharge like alimony and child support.
Contact Our Las Vegas Attorneys for Business Bankruptcy
Do you want to consider the options for your business? Are you wondering if business bankruptcy is right for you? Do you have questions about what type of filing might be best?
Let our Las Vegas attorneys for business bankruptcy answer all of your questions. Our legal team can help you determine what type of filing might meet your needs. At Half Price Lawyers, we offer affordable payment plans so that you can meet your personal and financial goals. Contact us today for your free and confidential consultation.