A business becomes bankrupt when it can no longer repay outstanding debts,
but filing for bankruptcy shouldn’t have to mean failure for you
or your business. Even giant companies like
Forever 21 face the threat of bankruptcy. When exploring this option, there are a
couple ways you can go.
Chapter 11 Bankruptcy
If you are struggling to turn a profit with your business, and therefore
failing to pay creditors back, you may want to consider filing a Chapter
11 bankruptcy. This type of bankruptcy gives you an opportunity to sell
assets in exchange for cash, use that money to pay-off debtors, and “reorganize
For example, Forever 21 filed bankruptcy and held nationwide 70% off sales
to get back on their feet. They also closed more than 7,000 stores and
encouraged customers to shop online. Assuming the company is able to pay
its debts, the business has every chance of recovering and regaining its
Chapter 7 Bankruptcy
In a Chapter 7 bankruptcy, debtors must still liquidate their assets, but
they are not in charge of this process. Instead, a trustee is appointed
and their company goes completely out of business. There is no way to
resolve this kind of bankruptcy. Everything associated with the business
will be sold to pay creditors. While this is the end of your business,
you are allowed to keep any individual income you make after filing, and
your home, clothing, furniture, and vehicle should be exempt from liquidation.
You may not have a business anymore, but you and your family will have
the opportunity to start from scratch.
What if My Business Partner Goes Bankrupt?
If you started a business with another person and they are no longer able
to fulfill their financial commitment, the business will automatically
be dissolved. This is similar to bankruptcy, but you won’t have
to file for anything except
the dissolution of the business. Additionally, you can use whatever assets are left after winding up to
form a new partnership.
Preserving Your Business
Countless factors can drive a business towards bankruptcy, but in most
cases, there’s still a chance to persevere. If you need help with
business disputes, agreements and contracts, or anything else in the field of
business law, our team at Allen, Semelsberger & Kaelin LLP can help. With the right
attorney, your business can go from the brink of bankruptcy to the height of success.
Don’t go through it alone; call (888) 998-2031 and request a free consultation.