It doesn’t matter where you are located — businesses go bankrupt all the time. Companies that are big or small; firms that are international in scope or are simply a local small business; and organizations that have an extensive footprint on their industry, or are merely just getting started; all of these entities, and every company inbetween, could go bankrupt. It’s the nature of business.
The thing is, while many business owners are confident in their ideas and are prepared for the daily rigors of operating a company, they may be sorely lacking in answers should the time come to declare bankruptcy. So what bankruptcy options are out there for business owners?
Well, in our last post, we talked about Chapter 11 bankruptcy and how that filing can help a business work on and implement a strategy to help the company get out of the situation it is in. That’s just one option, often called reorganization, available to bankrupt businesses.
A Chapter 7 bankruptcy is also possible, though this filing usually means the end of a business. Chapter 7 begins the liquidation process of your company. A trustee will be appointed to your case to sell your assets. Now, this is where a Chapter 7 filing may not necessarily be the end of a company: the original owner could swoop in and buy back the assets if no one else bids.
One other option is a Chapter 13 filing, though this is essentially only available to a business if they are a sole proprietorship. In other words, you are filing for business bankruptcy, but it’s basically a personal claim. Chapter 13 is a restructuring plan that allows a person to commit to a repayment plan so that their debt is eventually cleared.
Source: FOX Business, “A Bankruptcy Guide for Business Owners,” Donna Fuscaldo, Aug. 6, 2013