Most business owners in Quincy set off in high hopes that their enterprise will be profitable for years to come. However, increased competition, a struggling economy, a loss of customer base or any other number of reasons could lead a business to find itself in serious financial trouble. If a business is in over its head with debts it cannot pay, one option it may have is filing for bankruptcy.
Filing for business bankruptcy is not a bad thing. It is simply a process a business can use to pay off some or all of its debt or eliminate its debt altogether. A business can file for either Chapter 7 bankruptcy, Chapter 11 bankruptcy or Chapter 13 bankruptcy, depending on what kind of business it is and its bankruptcy goals.
Business owners may file for Chapter 7 bankruptcy when they determine that their business simply cannot continue its operations. Usually the business's debts are so significant, that repaying them under any circumstances is simply not possible. This is also known as a "liquidation" bankruptcy.
In a Chapter 7 bankruptcy, the court will appoint a trustee who will gather the business's assets and then make distributions to the business's creditors. At the end of the Chapter 7 bankruptcy process, the business's debts are discharged, and the business is no longer obligated to pay them.
Business owners may choose Chapter 11 bankruptcy if they think that their enterprise still has a future. In a Chapter 7 bankruptcy, the business is reorganized in a way that allows it to keep its doors open. A reorganization plan will be submitted to the court. It will contain information on how the business will pay back creditors. The creditors then vote, and if the court determines the Chapter 11 reorganization plan is fair, it will be allowed to proceed. This is usually a long-term plan, taking 20 years or more to pay back creditors.
Finally, if a business is a sole proprietorship, it may file for Chapter 13 bankruptcy. In a Chapter 13 bankruptcy a repayment plan is developed, based on what the sole proprietor earns, what the sole proprietor's debts are and what assets the sole proprietor owns.
In the end, business owners contemplating bankruptcy should think carefully before proceeding. Therefore, they may want to seek the help of an attorney, so they can make an informed decision.
Source: the balance, "What Is Business Bankruptcy?," Rosemary Peavler, accessed on Aug. 26, 2017