Faced with overwhelming debt, your small business may not be able to fight its way out on its own. Luckily there are some powerful tools at your disposal which can help you get out from under the burden of terrible debt and back into the swing of things. Filing Texas bankruptcy for your small business means the forgiveness of at least a part of the debt you owe, and in many cases the discharge of a very large portion of all debts in the company’s name. However, it can be difficult to know whether to file business Chapter 7 or Chapter 11 bankruptcies, as each depends on your unique situation.
Business Chapter 7
Business Chapter 7 is a liquidation filing, which essentially means the end of your business; a bankruptcy trustee is appointed to oversee the collection and sale of the business’s assets to cover the business’s outstanding loans. After all non-exempt assets are sold, remaining debts are discharged and the business is liquidated. Business Chapter 7 means your business will no longer exist, so it is a tool of last resort. Chapter 11, on the other hand, is a restructuring of debts into a repayment plan, which allows the company to continue (in most cases) doing business as usual while the proceedings take place.
Put in simplest terms, business Chapter 7 is best used when your business is no longer tenable and the desired result is the end of the company; Chapter 11 is used when the business intends to continue moving forward after the bankruptcy and doing business into the future. Of course, it gets more complicated than that very quickly, and a bankruptcy lawyer will help you decide what is the most viable option for your business’s financial situation.