Filing for bankruptcy can give a business owner some room to breathe. It prevents creditors from hounding you to pay your debts, giving you a chance to create a strategy for paying your dues.
However, bankruptcy may not be beneficial to every business owner. In addition, some types of bankruptcy proceedings may also be better suited to some companies more than others.
Due to the complexity of bankruptcy laws, you should engage an attorney for help with your case. Read on to find out the different types of bankruptcy and tips on how your lawyer can help.
Types of Bankruptcy
The US insolvency laws provide for three types of bankruptcy: Chapter 7 bankruptcy, Chapter 11 bankruptcy, and Chapter 13 bankruptcy.
Filing for Chapter 7 bankruptcy means that you close your business, and a trustee salvages any assets you might have. They then sell these assets to find money to pay your creditors.
If you are trading as a sole proprietor, it means that your personal and business finances are merged. Therefore, the trustee could also sell your personal assets, including your car, personal belongings, and home to find the money for creditors. You may, however, apply for some assets to be exempt from the bankruptcy proceedings.
Chapter 7 bankruptcy is ideal for service-based businesses. This is because there are no assets for the trustee to sell, and they cannot force you to work to repay your debts.
Chapter 11 bankruptcy allows a business to stay open as long as it has enough cash flow. The company will then remit small payments to creditors periodically to satisfy its debts. However, this insolvency option is only open to corporate entities, which means that sole proprietorships do not qualify.
Chapter 13 bankruptcy has similar provisions as Chapter 11 bankruptcy, except that it applies to sole proprietorships and individuals.
How Can a Business Bankruptcy Lawyer Help?
A business bankruptcy lawyer has a deep understanding of insolvency provisions and their implications. As such, they are well suited to give you advice on which type of bankruptcy to file for depending on your circumstances.
Secondly, the lawyer will prepare all the documents necessary to successfully file for bankruptcy. Their help takes a huge and overwhelming task off of your hands.
Thirdly, the attorney will represent you during any hearings, such as a creditors' hearing and an affirmation hearing.
There is no denying that bankruptcy can be a complex subject. If you feel overwhelmed by your business bankruptcy, do not hesitate to contact a lawyer. Their expertise and experience will go a long way in helping you with your matter.Share