Owning and operating your own business is no easy feat, and it can be easy
to accumulate debt loads that become insurmountable, both in your personal
life and professionally. Fortunately, the U.S. Bankruptcy Code provides
business owners with tools for addressing debt and financial instability.
Whether or not your business needs to be liquidated in bankruptcy depends
on a few factors.
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.
- While Chapter 11 bankruptcy allows business with substantial debt to reorganize
and create plans to become profitable after the bankruptcy process has
completed, it can also be used to facilitate an orderly liquidation of
assets. Businesses commonly take this approach when they decide to close
the business or because administrative costs become excessive, and can
benefit from buyer-friendly conditions.
- 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.
Bankruptcy is unique for every case, including for both individuals and
individuals who own businesses. At Allmand Law Firm, PLLC we work with
clients throughout the Dallas – Fort Worth area after they have
fallen on tough financial times. By working closely with our clients and
understanding their unique needs and goals, we help them take the most
appropriate steps toward the best possible resolution.
If you have questions about bankruptcy,
contact us for a FREE financial empowerment session.