There are a variety of situations where businesses may no longer be able to operate successfully while paying off debts and meeting other financial obligations. Depending on the unique circumstances that affect a company, debts may be addressed through a business bankruptcy. However, there are multiple options available to business owners, and understanding the best ways to address issues related to debt will ensure that a person can resolve these issues while minimizing their financial losses.
Types of Business Bankruptcy
The options available to business owners will usually depend on the structure of their business, the extent of their debts, and whether they will be able to keep their business in operation. Bankruptcy options in these cases include:
- Chapter 7 bankruptcy - A liquidation bankruptcy may be the best option if there is no viable way for a company to continue operating. In this type of bankruptcy, business assets will be liquidated, and the proceeds will be used to repay the business’s debts and financial obligations. The business will then cease operating. This may be the best option for sole proprietors who are personally liable for business debts.
- Chapter 11 reorganization - Business owners who wish to ensure that a company can continue operating may be able to use this option to reorganize their business operations and pay off debts. In these cases, a business will need to submit a reorganization plan showing how debts will be repaid and detailing the changes that will be made to ensure that a business will be able to continue operating successfully. Creditors will usually need to approve this plan, and the business owner will need to provide a detailed accounting to ensure that they are meeting their ongoing obligations. While this option may require a business to make significant changes or scale back operations, it can help owners avoid the closure of a business.
- Chapter 13 bankruptcy - In some cases, sole proprietors may be able to use this type of bankruptcy to reorganize their debts and pay them off through a repayment plan. This may allow a business to continue operating while ensuring that a business owner will be able to maintain possession of personal assets such as their home.
Contact a United States Business Bankruptcy Lawyer
When a business is struggling to meet its financial obligations while maintaining business operations, owners, partners, or shareholders will want to understand the options that are available. By determining whether bankruptcy will provide a way to address debts and either continue operating or cease operations, business owners will be able to move forward and avoid additional financial issues. If your business is struggling, and you need to determine your options, you can find a business bankruptcy attorney near you and begin taking steps to address these concerns.