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Bankruptcy Options For Businesses

Jun 12, 2008
Bankruptcy is a word that strikes fear for individuals let alone for a business. It means that the business is suffering financially. It doesn't always mean that the business will be closing its doors though. It could mean they are going to take some time to reorganize. The corporate credit for any business that has filed for bankruptcy though can be severely scarred. It is important to understand how it will be affected before you file.

It isn't an easy decision to file for bankruptcy though and that is something people need to realize. The law doesn't make it easy for a business either so you can't do so in an effort to keep all the money you make and to run. There are various types of bankruptcy that a person can apply for. Understanding the basics should turn you to someone with more experience. They can help you with all the details of the process.

Be very honest with the information you supply to the attorney so they can assist you. It can be embarrassing to face bankruptcy but you need to understand they are in place to help you. If they don't have all the right information it can prevent them from providing you with the right circumstances. One you hear about the most is Chapter 7 bankruptcy which is reserved for those companies in dire need of financial relief.

If the criteria is met it can result in the unsecured debts of the company being absolved. It can also result only a percentage of the secured debts having to be paid. For a large company this can result in millions being saved. Yet it is the lenders who suffer and they will pass that loss on to their other customers in some format.

Chapter 13 is often one that small businesses use as they don't have the high dollar amount of debt. This generally allows some of the debt to be forgiven. For the most part though it has to be repaid but in small payments that a person can make. Again, the specifics of it will depend on what the circumstances are. The business may or may not remain open with such bankruptcy being filed.

There is also Chapter 11 which is used for those that definitely want to try to reorganize. Even large businesses such as airlines have used this to be able to stay afloat. With the economy at a low right now there are more companies filing for bankruptcy than ever before. Keep in mind that it will stay on the business credit report for a minimum of 7 years after it is filed.

The costs involved with filing for bankruptcy will vary. There are court mandated costs that have to be covered. There is also the cost of the lawyer. You want someone who knows what they are doing so it can be quite expensive. Make sure you discuss those fees up front so you understand what it is going to cost your business for the process.

It is wise for any type of business to avoid filing for bankruptcy if possible. Sometimes it is the best possible decision to make though based on the circumstances. The various options need to be discussed with professionals who can help you come to your decision. Should you decide bankruptcy is the way to go make sure you follow all of the regulations for it. The process isn't easy but one that can be accomplished if done correctly.
About the Author
Robert Bain is a seasoned business author. Read the ups and downs of small business credit, building business credit, aged and shelf companies and many more topics.
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