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Business Bankruptcy


Business that are looking to either restructure their debts or shut down their business can utilize a bankruptcy to potentially lighten their debt load. In general, the two chapters of bankruptcy that are available to businesses are Chapter 7 and Chapter 11. If a business is operated as a sole-proprietor, then Chapter 13 is also available. Chapter 7 requires that the business cease operations.

For many businesses Chapter 7 is not necessary, but may be easier if issues arise such as collectors harassing the business, or even lawsuits threaten to continue. A business is effectively turned over to a Bankruptcy Trustee who becomes the operator of the estate and the business. The Trustee will attempt to sell of any assets of the business to pay off unsecured creditors. Unsecured creditors are paid off according to their percentage of debts.

Chapter 11 allows for the business to continue in operations and attempt to restructure debts, as a way to avoid the closing of the business. Chapter 11 is a complicated and expensive proceeding that requires continual contact with an attorney, and monthly reporting to the Bankruptcy Court. But, it can be a powerful means of righting a ship that may be otherwise sinking.

Chapter 13, again only available to sole proprietor businesses, allows a business to also reorganize its debts. The procedures in Chapter 13 are much simpler, with costs much reduced. In fact, the Bankruptcy Courts in the Northern District of California limit attorney’s fees based on the complexity of the case. 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.