Business Chapter 11: A Primer

: Chris Lee Law Firm

  Filed under: Chapter 11

EducationIf you are a business owner saddled with large debts, and have creditors knocking at the door, it can be tough to maintain a level head and decide what to do for your company’s financial future. When it comes to the decision to file for bankruptcy this is even more the case. Hiring a Fort Worth bankruptcy lawyer is a smart first move; he or she will help guide you through the next important step, deciding whether to file business Chapter 11 or Chapter 7 bankruptcy.

Business Chapter 11: Advantages

The most important difference between filing business Chapter 11 and Chapter 7 is that, in business Chapter 11 your company continues operations as usual while restructuring debt and negotiating with creditors to pay back a portion of what is owed. Chapter 7, on the other hand, is a liquidation proceeding, terminating the existence of the company and dissolving its outstanding debts. A new company can then be formed from the ashes, but the days of doing business as XYZ Corporation are over for good.

Many if not most smaller businesses opt for Chapter 7 liquidation, since it allows for the discharge of most to all the company’s outstanding debts. If your business has a large amount of assets and cash flow, but also faces significant debt, then business Chapter 11 may be the appropriate path.

In Chapter 11 a proposal is made to repay outstanding debts. This proposal must be accepted by all creditors involved in the proceeding. Once the proposal is accepted, your company is able to continue doing business just as prior to the bankruptcy, while repaying its debts according to the schedule agreed to in the filing. Many prominent corporations continue to exist today after successful business Chapter 11 filings.

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