The decision to file a bankruptcy for a business usually comes after years of struggling to find revenue to keep the business running or litigation against the business that creates an unsustainable burden. The two main chapters of bankruptcy businesses utilize are Chapter 7 and Chapter 11. For sole-proprietor businesses, Chapter 13 can also be used. In Chapters 11 or 13, the business continues to operate, while in Chapter 7 the business ceases operations.
Chapter 7 filings for business in California generally are not necessary. If your business is a limited liability company (LLC) or corporation, you can simply, through the Secretary of State, terminate the entity through a dissolution procedure. However, sometimes Chapter 7 is effective to terminate collection efforts, especially those efforts in current litigation.
Upon filing a Chapter 7, the business is immediately turned over to a Chapter 7 bankruptcy trustee. That trustee will see if the business has any assets to sell and pay towards creditor debts.
Chapter 11 permits the continued operation of the business. It allows for a reorganization or restructuring of the debt of the business, including secured debt. Chapter 11 cases can be expensive, and are complicated. The Bankruptcy Court requires continual reporting on the finances and operation of the business, on a monthly basis. However, the benefits, if a plan is confirmed, can be extremely beneficial to a business fighting to save its life.
If you are able to do a Chapter 13 for your business, the Chapter 13 trustee reviews your case, and allows you to continue running your business. You will have a monthly payment plan that will be applied to creditors. It is a quick, and somewhat simple procedure. Additionally, the costs are much, much less than those in Chapter 11. Chapter 13 business cases generally take sixty (60) months to complete.
Should you have interest in filing a bankruptcy for your business, please contact the Henshaw Law Office today.