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How do you know which kind of bankruptcy to choose?

On Behalf of | Dec 4, 2020 | Chapter 7 |

2020 has been a tough year, and it is safe to say that many businesses have struggled with a failing economy. If your business has created debts but is not bringing in the income you expected, then you may be in a position where you are looking into bankruptcy.

As a business owner, you have two main options for bankruptcy, Chapter 11 bankruptcy and Chapter 7 bankruptcy.

Chapter 11 bankruptcy allows you to restructure your business so that you can stay open and arrange your debts in a way that you can operate with greater profits.

Chapter 7 bankruptcy is liquidation, which means that you will be closing your business to pay off the debts you owe.

How do you know which kind of bankruptcy to choose?

The primary way that you are going to know which one to choose is by looking at what you want to do. Do you want to stay open? Would you like to close the business because it is unlikely to change even with restructuring? If you want to remain open, then Chapter 11 bankruptcy makes sense. If you want to close, it doesn’t.

If you decide to close your doors, how does a Chapter 7 bankruptcy help?

With Chapter 7 bankruptcy, one of the first things that happens is that creditors are no longer allowed to take collection actions against you. This means that you can protect your property and prevent your bank accounts from being levied. You will also have a court-appointed fiduciary who will take over control of liquidating your company and distributing the proceeds.

It can be hard to decide which kind of bankruptcy you want to use, but if you have decided that you are ready to choose one of them, then your attorney will be able to walk you through the different options.