Bankruptcy can happen to anyone at any time, including businesses and other organizations. In truth, a company could fail for many reasons, whether economic or personal. However, this should not mean that these entities must close up when they encounter hard times. There are actually a variety of options that businesses have when they need help, and in the below post, we will review some of these options in more detail. 

What Options Does Your Business Have When It Comes To Bankruptcy

In the United States, there are various types of bankruptcy filing categories, known as Chapters. Each Chapter has a different meaning for small businesses in Florida.

Chapter 7 Bankruptcy

Filing for Chapter 7 bankruptcy can help you eliminate all your business and personal debts. It may also allow you to keep your inventory and personal belongings, depending on the exemptions applicable to your case. Chapter 7 bankruptcy is commonly known as a liquidation bankruptcy, as it involves selling off your non-exempt assets to pay off your debts. However, you will not have to repay any debt. Instead, non-exempt property will be sold off, and the assets will be distributed to your creditors. Once the process is complete, all debts that can be discharged in bankruptcy will be wiped off. 

It is important to note that Chapter 7 bankruptcy tends to rarely be used by companies as it ultimately closes the business down. 

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a type of reorganization bankruptcy that can only be filed by individuals. As a result, you cannot file Chapter 13 on behalf of an LLC or a company. However, it may be something you consider if you own a small business or are personally responsible for business-related debts.

Chapter 13 bankruptcy allows you to reorganize your debts through the court into a payment plan you can afford. This type of bankruptcy can be beneficial if you are behind on payments for secured assets. Additionally, a Chapter 13 bankruptcy can also eliminate unsecured debts like credit cards, similar to a Chapter 7 bankruptcy.

Chapter 11 Bankruptcy

Chapter 11 of the bankruptcy code is a form of bankruptcy that involves the reorganization of a debtor's business debts, assets, and affairs. In this type of bankruptcy, the debts are reorganized and paid off gradually over a period of up to six years. During this time, the business can continue operating while the debt is paid off. Once the remaining debt is discharged, the bankruptcy is closed, and the company can make a fresh start.

It should be noted that a company undergoing Chapter 11 bankruptcy proceedings cannot make certain decisions without the court's permission. The court will have control over decisions related to selling assets other than inventory, expanding or stopping business operations, or starting or terminating a rental agreement. Additionally, the court will decide whether the company can enter into contracts with vendors and unions. 

For Further Information About Business Bankruptcy, Contact The CYA Law Firm Today 

If your business is facing financial difficulties and you are considering filing for bankruptcy, contact the CYA Law Firm today to schedule your free consultation with Attorney Adalbert “AL” Martinez and review your options.