If you own a business and your top goal is to protect both yourself and that business, you may need to consider Commercial Bankruptcy if you ever get into financial trouble. This type of bankruptcy, also known as business bankruptcy, is different than personal bankruptcy and will not impact your personal financial status. It is important that your personal finances and your business finances are always kept totally separate in order to have a successful business bankruptcy, and your lawyer can help you make sure this is done properly. There are two basic kinds of business bankruptcy available to business owners, as explained below.
Chapter 7 Bankruptcy For Business Owners
In a chapter 7 bankruptcy for business, the vast majority of your debts will be erased. If your company has any assets left, you will be required to liquidate those in order to declare bankruptcy. After liquidation of any business assets, the debts will be repaid to those your company owes money to. This money may not be enough to repay all the debts, and in fact in many cases it is not. The law sets forth a specific order for business debts to be paid in during a liquidation, so some creditors may not receive any of the money they are owed. If this occurs, the bankruptcy judge can officially forgive the debt. If your business has failed and you have no further interest in trying to keep it going, this might be the best option for you.
Chapter 11 Bankruptcy For Business Owners
In a chapter 11 bankruptcy for business, the company is usually having serious financial problems, but still has an interest in continuing to operate. A chapter 11 bankruptcy is more of a reorganization of business than it is of a forgiveness of all debts, like a chapter 7 bankruptcy is. The bankruptcy judge has the power to forgive certain debts, to allow late payments, and even to put debts on pause so that no further interest accrues. The reason that a bankruptcy judge would allow these things is because the business owner has provided a solid plan to revitalize the business and start again. If you are just overwhelmed with debt but still want to make a go of the business, this could be a good option for you. Your attorney can tell you which type of business bankruptcy is most likely to be approved for you. For more info click here.
