3 Types Of Business Bankruptcies To Hire A Lawyer For
Posted on: 31 March 2021
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Only a few businesses run successfully for the first 10 years. Many run into bankruptcy. When you face insolvency, you need to decide whether you should file for bankruptcy. Essentially, your business type and structure determine which bankruptcy clause to file. Filing bankruptcy isn't easy, and you'll need a bankruptcy attorney to navigate the process. Below are three main types of bankruptcies that require the assistance of an experienced lawyer:
1. Chapter 13 Bankruptcies
A sole proprietorship business is mainly covered under Chapter 13 bankruptcy, commonly used for filing personal bankruptcy. According to law, such a business is not separable from its owner, and the owner is responsible for the debts and liabilities.
In this category, the court serves bankruptcy requiring you to reorganize how you pay your debts and liabilities. It means you can continue running the business while meeting your debt and liability obligations. Furthermore, you don't stand the risk of losing your personal belongings because of the debt. The debt repayment approach will depend on the business's income, the value of its property, and the amount owed.
Your business's income is subject to an investigation before bankruptcy is granted. The court will reject the bankruptcy application if your incomes are above a certain level. Even so, you can still qualify for bankruptcy with the help of a seasoned bankruptcy lawyer.
2. Chapter 11 Bankruptcies
Chapter 11 bankruptcy applies to business partnerships that can still pay their debt obligations and continue to operate. Your company will file a plan indicating how you intend to pay off the debt. The court can approve or rejects the plan. Additionally, the company will need to terminate all the contracts and leases.
The court might also demand that you pay part of the debt and settle the rest in small installments later. It may take a year for the approval of the bankruptcy. The bankruptcy clause for business partnerships applies equally for corporations where they can file either Chapter 11 or 13.
3. Chapter 7 Bankruptcies
Chapter 7 is another bankruptcy clause applying to corporations, partnerships, and sole proprietorships intending to dissolve the business. The business dissolves on approval of the bankruptcy. At that point, a trustee takes over the business assets and distributes them to the creditors. The owner is then released from all debt obligations when that happens.
A bankruptcy attorney can help expedite the approval of a sole proprietorship, partnership, and corporation bankruptcy, whether you want to dissolve or continue with the business. They increase your chances of getting a favorable outcome.
If you have more questions, contact a local bankruptcy lawyer.