Corporate entities in Pennsylvania may be able to obtain debt relief by filing for bankruptcy. Generally speaking, they can choose to file either Chapter 7 or Chapter 11 protection. Take a look at the differences between these two options and how you can decide which may be best for your organization.
Chapter 7 bankruptcy allows a company to liquidate assets
Filing for Chapter 7 bankruptcy allows you to liquidate corporate assets such as an office building, company car or corporate bank account. The money raised by selling off assets will be used to pay as much of your outstanding debts as possible. Seeking a liquidation bankruptcy may be ideal if you used personal assets as collateral to secure a business loan.
Chapter 11 bankruptcy allows a company to reorganize its debts
A Chapter 11 proceeding is essentially a Chapter 13 proceeding for corporate entities. It allows your business to renegotiate the terms of bank loans, vendor contracts or union agreements. In some cases, it may be possible to do so without losing property.
Which option might best meet your organization’s needs?
If your company files for liquidation bankruptcy, it will be required to cease operations. However, once the case has been discharged, creditors will have little recourse to collect any remaining unpaid balances. If your company files for Chapter 11 protection, it can remain in operation through the duration of the case. A commercial bankruptcy attorney may be able to help you determine whether it’s better to close the business for good or whether it makes sense to remain open.
Filing for bankruptcy can have significant consequences for your business and your personal finances. Therefore, it may be a good idea to speak with an attorney who is familiar with bankruptcy law. He or she might be able to talk more about the various benefits of filing for protection from creditors, how to do so and how long it might take to obtain a discharge.