There may come a time when you can’t make a business loan payment or fail to make a personal credit card payment on a balance used to fund your company. If talking to your creditors about alternate payment arrangements fail and you have no other options to resolve your debt issues, it may be a good idea to look at bankruptcy. How can a liquidation bankruptcy help a business owner? Learn the answer to this question below:
What Is a Liquidation Bankruptcy?
Under Chapter 7 of the bankruptcy code, debtors have the right to have their assets liquidated and the money used to pay off creditors. For businesses, filing for Chapter 7 bankruptcy means selling off company assets and using that money to pay off creditors up to the amount raised through liquidation. For sole proprietors or business owners who secured debt through personal collateral, bankruptcy may discharge personal and business debt at the same time.
Why Companies Should Consider Bankruptcy
The best reason why a company should file for bankruptcy is to ensure that the company is shut down in an orderly fashion. Instead of facing a stream of lawsuits and other legal challenges, the business can simply stop existing without worrying about future actions by creditors, vendors and employees. Generally, employees do not need to be paid or given compensation for benefits should the company go under in this fashion.
Does the Company Emerge From Chapter 7?
No, a business does not emerge from Chapter 7 no matter what structure it uses. Unlike Chapter 11 that allows for reorganization of debt, Chapter 7 merely liquidates assets and allows the company to terminate operations. Business owners may be able to reform the company at a later date, but bankruptcy may make it difficult to get loans or other capital in the months and years following the closure.
If you are running a company that is having tough financial times, it may be worth talking to a bankruptcy lawyer such as those from Ruffi Law Offices, S.C. Such an individual may be able to work with you to help discharge your debts in a timely and orderly manner. While the case is open, creditors cannot contact you about the debt or attempt to collect it once the case has been closed.
Chapter 7 Bankruptcy for Businesses, FreeAdvice.com
Chapter 7 Bankruptcy for Corporations and LLCs, TheBankruptcySite.org
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