Corporate Bankruptcy Options
As a corporation, you will first need to choose Chapter 7 or Chapter 11 when filing for bankruptcy protection. Consulting with one of our experienced bankruptcy attorneys will help you decide which option is best for your business; however, the following descriptions are a good place to start if your business is headed for bankruptcy:
Chapter 7 bankruptcy can be used by an individual or business debtor and is frequently referred to as a “liquidation” because all non-exempt assets are sold by the bankruptcy Trustee, and the profits are used to repay creditors of the debtor. If you file a Chapter 7 bankruptcy, all business operations must cease, and an automatic stay is issued preventing creditors from attempting to collect on outstanding debts. Creditors in a Chapter 7 bankruptcy are prioritized. When there are insufficient assets to pay all debts, priority creditors will be paid first. Secured creditors, for example, will be paid before unsecured creditors and preferred stockholders are paid before common stockholders. Upon discharge, the business will no longer exist, and any remaining unpaid debts are discharged.
Chapter 11 bankruptcy is known as a “reorganization” because it allows the business to continue operations. In Chapter 11 corporate bankruptcy the debt is restructured to make it more manageable. The goal in a Chapter 11 bankruptcy is for the corporation to come out of the bankruptcy turning a profit once again. Chapter 11 bankruptcy is a lengthy and complicated process involving the appointment of a creditor committee to represent the interests of unsecured creditors. The business must also adhere to the reorganization plan for up to two years to acquire a successful discharge. If the reorganization plan fails, the bankruptcy is converted to a Chapter 7 and the business ceases operations.
Our aim is to help you decide which bankruptcy option is best suited to your situation and then advocate for your business throughout the bankruptcy process. When possible, our goal is to keep your business operating and working toward earning a profit. When that is not realistic, we will protect your business as we work through the liquidation process.