Company Bankruptcy List of Possible Filings
When considering company bankruptcy, you will face many unpleasant decisions about your firm’s future. Your first decision will be whether company bankruptcy makes sense for your firm.
Often this is the worst choice. If you are unsure about whether you should file company bankruptcy, then you should click company bankruptcy alternatives.
If you decide that company bankruptcy is the best course for your firm, you must select, with the help of your company bankruptcy attorney, the type of bankruptcy filing. In the United States, you have three types of filings 1) Chapter 7, 2) Chapter 11 and 3) Chapter 13. Each of the company bankruptcy filings are named for the relevant sections (Chapters) in the US Bankruptcy Code.
Chapter 7 Company Bankruptcy
This is the most common filing for a business. This is a liquidation filing.
With this filing, you file the company bankruptcy with the court, the
court selects a trustee, and the trustee winds down the firm with money
going to the creditors. Of course, if there is anything left after paying
creditor claims, the equity holders may get some of their capital back.
With Chapter 7, you hand over the keys to the trustee and then you walk away. This filing makes the most sense when your business model is no longer profitable and there is no chance that you can turnaround your business.
Chapter 11 Company Bankruptcy
You should select this form if your firm has a profitable operations,
but it is has too much debt and other obligations. Chapter 11 helps you
because it allows the firm to continue to run while you and your creditors
agree to a balance sheet reorganization.
The key downsides of this form of filing are the creditors usually end up owning most of the business and, the firm usually cannot afford the legal fees. Often, the judge with convert a Chapter 11 case into a Chapter 7 case because the firm cannot afford the court costs and legal fees.
Chapter 13 Company Bankruptcy
Only individuals can file for Chapter 13. Therefore, if your firm is a
sole proprietorship, this may make the most sense for you, although you
can also file Chapter 7 or 11 as well. To qualify for Chapter 13, you
must have less than $750,000 in secured debts and $250,000 in unsecured
debt. With a Chapter 13 filing, you prepare the plan of reorganization
and the creditors do not vote on the plan. You have up to 3 years to repay
your creditors.
I hope that this web page has helped you understand a legal filing better. As we stated earlier, filing should be your last resort. Make sure to explore your company bankruptcy alternatives before filing.
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