Business Bankruptcy

Bailout – Chris Alliotts Law from AlliottsLaw on Vimeo.

If you are the owner of a small business that has become overwhelmed by debts, you may have been advised to file Chapter 11 Bankruptcy. This form of Bankruptcy is complex, time-consuming and prohibitively expensive. With proper counseling, most people and small businesses inquiring about Chapter 11 are better served by Chapter 7 or Chapter 13.

Chapter 7 Versus Chapter 13 Bankruptcy

While Chapter 7 Bankruptcy is an option for small businesses, it usually requires that the business be shut down. If you have invested a significant amount of time, money and energy into your business, you may not want to take this step. Chapter 13 Bankruptcy may allow you to eliminate your debts while keeping your doors open.

Does Your Small Business Qualify for Chapter 13?

Business Bankruptcy law is complex. Chapter 13 Bankruptcy can be used by a sole proprietorship to create a payment plan to address debts for leased equipment, back taxes, business vehicles and more. The payment plan is built to work within your means, stretching out between three and five years. After the payment plan is completed, the remaining debts will be discharged.

Chapter 11 Bankruptcy

Close up of bankruptcy petitionChapter 11 is the most complicated and expensive form of Bankruptcy. It involves a significant amount of work by the attorney and client for the case to succeed. Its primary purpose was to be used by large businesses seeking to reorganize their obligations and protect their assets. Nonetheless, it remains a viable remedy for individuals with significant assets and liabilities.

Recently, the U.S. Bankruptcy Court promulgated certain form documents to streamline the process for individuals in need of reorganizing their financial obligations. This development is a positive development for individuals who do not qualify for Chapter 13 because their debts are too high and who do not wish to relinquish control over their assets in Chapter 7.

Still, the process is fraught with uncertainties and remains much more costly than Chapter 7 or Chapter 13. Before proceeding with Chapter 11, the client needs to understand such uncertainties, the risks involved and the potential benefits. Competent strategies and clear communication of the facts in a Chapter 11 case are essential. Given our experience with Chapter 7, Chapter 11 and Chapter 13, prospective clients can be confident that we will properly advise them on which chapter is best for their situation and be there throughout the complex process.

Visit our Small Business Bankruptcy page for more information

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