Whether or not your business needs to be liquidated in bankruptcy depends on a few factors.
Let's take a look at the variables:
- The type of bankruptcy you file will help determine whether or not your company needs to be liquidated. If you file a Chapter 7 bankruptcy for your business, your company will be liquidated and the income from the sale of assets will be distributed to creditors. Remember, filing Chapter 7 bankruptcy for a business is different than filing Chapter 7 bankruptcy for an individual. If your company is not incorporated and it is a sole-proprietorship you may need to file a personal Chapter 7 bankruptcy. This is something you need to discuss with your bankruptcy attorney.
- If you file a Chapter 11 bankruptcy for your business, your company's debts will be restructured so that they can be repaid overtime, much like a Chapter 13 bankruptcy for individuals and couples. If you are a small company with few assets, then filing Chapter 11 bankruptcy may not make sense for you because of its expense and complexity. However, if you were to file Chapter 11 bankruptcy, your company would not need to be liquidated as long as a bankruptcy plan was presented and approved by the bankruptcy court.
- If your company has value and you plan to continue operating it, then you may not want to liquidate your company in bankruptcy. However, it is up to the bankruptcy trustee to determine the value of your company and to determine if there are assets that should be liquidated for the benefit of the creditors. But even if your company and its assets are not liquidated, you will need to repay your debts via a bankruptcy plan approved by your creditors and the bankruptcy court.