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Will I Need To Liquidate My Business If I File Bankruptcy?

Posted By Allmand Law Firm, PLLC || 28-Jul-2017

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.

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