Frequently Asked Questions About Commercial Bankruptcy in Pennsylvania
Answers from seasoned attorneys in Lancaster, Reading, and Wyomissing
The following is a general explanation of commercial bankruptcy. For more information about bankruptcy law and how it might help you, please contact Case & DiGiamberardino P.C. Our firm has assisted clients in southeastern Pennsylvania in the counties of Berks, Lancaster, Lebanon, Lehigh, Schuylkill, Montgomery, Chester and Northampton since 1984.
Commercial bankruptcy FAQ
- How will I know that declaring bankruptcy is right for my business?
- When does filing Chapter 11 make sense?
- What happens to me as a shareholder when a corporation declares bankruptcy?
- Can a business be forced into bankruptcy?
- What does a trustee do?
Commercial bankruptcy FAQ
An attorney experienced in bankruptcy law can help you determine the options that best suit your particular situation. Corporations and partnerships can file for Chapter 7, sole proprietorships can file Chapter 13, and other commercial enterprises can file for Chapter 11 bankruptcy, which repays creditors through a court-approved plan of reorganization.
In Chapter 11 bankruptcy, your commercial enterprise pays creditors according to a court-approved reorganization plan. This allows your business the opportunity to get back on its feet and back on a path to profitability. Bankruptcy court approves or rejects your plan. You should consult both your financial and legal advisors to determine whether this serious step is right for you and your business. Not every Chapter 11 case results in restored profitability. Chapter 11 could also ultimately result in liquidation.
A corporate bankruptcy should not directly affect its shareholders. If the officers or shareholders are personally liable for the business debts, the automatic stay in the corporation’s case does not prevent creditors from trying to collect from others who may be liable. Shareholders do not have to be notified of a Chapter 7 filing, because they usually do not receive anything in return for their investment. Once creditors are paid in full, the court notifies shareholders to file claims to whatever money remains.
Yes. Creditors can initiate an involuntary bankruptcy proceeding against a business. This occurs in infrequent situations when creditors are concerned that the debtor business is squandering or misappropriating assets that should otherwise go toward paying debts owed them.
The trustee’s responsibility is to:
- Administer the bankruptcy
- Make sure creditors get as much payment as possible
- Run the first meeting of creditors (called the “section 341 meeting”)
- Get information from you
- Get documents related to your bankruptcy
Trustees can be private individuals or corporations. They are not necessarily lawyers and the courts do not pay them. Their fees come from the bankruptcy filing fee or are a set percentage of the money distributed in the bankruptcy.