Under Chapter 7 bankruptcy, a company ceases its operations. A trustee is appointed to liquidate all the company’s assets, and uses the proceeds to pay the administrative expenses of the bankruptcy estate and the claims of creditors in order of priority. Chapter 7 bankruptcy benefits business owners by shifting the time and expense liquidating the business to a trustee.
Chapter 7 bankruptcy is the most common type of bankruptcy. A Chapter 7 bankruptcy discharge eliminates your legal obligation to pay most of your debts. Some debts are not discharged, such as student loans, child support, and most taxes. Typically, you are able to keep property such as a house and vehicle by agreeing to continue paying for them during and after the bankruptcy.
Chapter 11 bankruptcy provides many restructuring benefits for a company including the ability to pay past due taxes over a five-year period. During the Chapter 11 bankruptcy process, the company remains in control of its assets allowing the management who knows the company best to work with counsel to “reorganize” business operations and develop a plan to restructure debts.
Chapter 11 bankruptcy, which is very similar to Chapter 13 bankruptcy, can be used to save your home from foreclosure and pay past due taxes. Chapter 11 bankruptcy is designed for higher income individuals who may not be eligible for Chapter 7 bankruptcy or who exceed the debt limits of Chapter 13 bankruptcy.
Avoid Bankruptcy: Out-of-Court Debt Restructuring
When revenues drop faster than your company can cut expenses or downsizing will help the business survive, we can assist by negotiating a workout with creditors. Our legal and objective financial analysis of the various agreements with creditors often generates multiple options for resolving defaults and restructuring debts to allow the business to continue.
Court-supervised debt repayment plan
Chapter 13 bankruptcy allows you to restructure your debts into an affordable payment plan. Creditors are paid based on what you can afford, not what they are owed. Chapter 13 bankruptcy can be used to catch up on mortgage payments, repair tax issues, or if you have previously filed bankruptcy. Typically, you can keep all of your assets in Chapter 13 bankruptcy.