For most laypersons, a business declaring bankruptcy is the same as announcing it is shutting down. This is not necessarily the case, particularly if a business elects a form of commercial bankruptcy that enables it to restructure in order to regain solvency. If your business is struggling like so many in today’s economy but you want to remain open for business, you may still benefit from bankruptcy proceedings.
Options for filing commercial bankruptcy
Your lawyer can explain the different types of bankruptcy in greater depth. The following is provided only as a quick overview of the different types of business bankruptcy:
- Chapter 7. This is most often associated with personal bankruptcy, but can also be used by businesses (usually sole proprietors and other small businesses with few assets) that intend to shut down following liquidation of their assets to settle outstanding debts. You should be aware that if your personal assets are intertwined with your business, you might risk losing them in the liquidation, as well.
- Chapter 11. Most people are familiar with this form of commercial bankruptcy. A Chapter 11 bankruptcy allows you to continue to do business according to a reorganization plan worked out with the court and under the watchful eye of a court-appointed trustee. Chapter 11 is only an option for sole proprietorships, corporations and partnerships.
- Chapter 12. This is a unique form of bankruptcy that was designed for family farmers or fishers with regular annual income. It involves coming up with a repayment plan consisting of payments to creditors made within three to five years.
- Chapter 13. Works much like Chapter 13 filings by individuals but can be used by sole proprietorships. You and your attorney will create a repayment plan for your business to file with the bankruptcy court explaining exactly how you plan to repay creditors. Like Chapter 11, this is also considered a reorganization form of bankruptcy. Chapter 13 also offers greater protection of personal assets, like your home, than Chapter 7.
Commercial bankruptcy is a very complex process. You need to discuss such specifics as whether your business can survive reorganization or if creditors are forcing you into bankruptcy with one of our competent Pennsylvania commercial bankruptcy attorneys before making any final decisions.