If you’re staring down business bankruptcy, just waiting for the day you have to file, there are a few things you need to know about what’s headed your way so that you can turn this experience into a positive event that will propel you into the future with confidence. Firstly, there are two main types of bankruptcy to consider: liquidation and reorganization. Depending on which route you choose in filing for bankruptcy, your experience and future prospects will differ.
Essential Knowledge: Business Bankruptcy
Chapter 11 is a form of reorganization. Under Chapter 11 you still control your company (though the court keeps an extremely close eye on your activity), and can restructure your company to put it in a better position for the future
Chapter 7, on the other hand, is a form of liquidation. When you file for Chapter 7 bankruptcy, the business is closed. All remaining assets are liquidated, and the money is used to take care of legal fees and pay off debts so that you can start a fresh life.
Those who are looking to try and restructure their company for a healthy financial future should look into Chapter 11 bankruptcy. This is a wonderful opportunity and a second chance. Many who go through Chapter 11 find that their business has been revitalized and they have a brighter outlook for the future than ever before.
Chapter 7 can be a huge relief for many owners filing for business bankruptcy. If you feel overwhelmed by the financial hardships your debts impose upon you, Chapter 7 can be a lifeline to help you out of a bad situation and give you a clean slate for future endeavors.
Your goals and unique situation will determine which type of business bankruptcy makes the most sense for your business. Understanding the basics, and doing further research, are the two most important things you can do for yourself at this point in the game.