Bankruptcy is legal process which businesses choose to file when outstanding debt prohibits them from operating. There are a variety of options to choose from when facing this situation. While some result in a business completely folding, others allow an organization to restructure their financial obligations and stay open.
- Chapter 7 is appropriate for organizations that completely lack the ability to continue operating. Referred to as liquidation, all assets are sold to repay debts, and the company is dissolved.
- Chapter 11 allows businesses to continue operating while reorganizing under the watch of a court appointed trustee. This option is available to sole proprietorships, partnerships and corporations.
- Chapter 12 allows those in debt to make installment payments to creditors over a period lasting up to five years. This option is available to "family farmers" or "family fishermen" with "regular annual income."
- Used by sole proprietorships, Chapter 13 requires that filers file a debt repayment plan with the courts. This is used to prevent the loss of personal assets that may be tied to their business.
- It is important for any business owner considering bankruptcy to consult a licensed financial professional such as an accountant or financial advisor and attorney to determine which option is best for them.
评论