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Business Bankruptcy Protection
Business Bankruptcy Protection
When debt becomes insurmountable, bankruptcy provides a powerful legal framework to protect your business, stop creditors, and create a path for a fresh financial start.
Chapter 7 vs. Chapter 11 Bankruptcy
Chapter 7 vs. Chapter 11 Bankruptcy
Understanding the two primary paths for business bankruptcy and which might be right for you.
Chapter 7: Liquidation
Chapter 7: Liquidation
The "straight bankruptcy" path to close a business and discharge debts.
A court-appointed trustee sells (liquidates) your business assets to pay creditors. Any remaining eligible debt is discharged.
Best For: Businesses that are no longer viable and need to shut down cleanly.
Key Feature: Relatively quick process to end creditor harassment.
Outcome: The business ceases to exist, but the owner is freed from its debts.
Chapter 11: Reorganization
Chapter 11: Reorganization
A strategic option for businesses to restructure and continue operating.
This allows your business to remain open while you create a court-approved plan to repay a portion of your debts over time.
Best For: Fundamentally sound businesses that are overwhelmed by current debt loads.
Key Feature: You remain in control of the business as a "debtor-in-possession."
Outcome: Business emerges leaner, with manageable debt and a path to profitability.
Bankruptcy FAQs
Bankruptcy FAQs
Your questions about business bankruptcy, answered.
What is the 'automatic stay'?
What is the 'automatic stay'?
The automatic stay is a powerful legal protection that immediately stops most creditors from pursuing collection actions against you or your business the moment a bankruptcy petition is filed. This includes stopping lawsuits, wage garnishments, and collection calls.
Can bankruptcy really eliminate all my business debt?
Can bankruptcy really eliminate all my business debt?
It depends on the type of bankruptcy and the nature of the debt. Chapter 7 can liquidate assets to discharge many unsecured debts. Chapter 11 allows for reorganization and can reduce overall debt while allowing the business to continue operating. Certain debts, like some taxes, are typically non-dischargeable.
Will I lose my business if I file for bankruptcy?
Will I lose my business if I file for bankruptcy?
Not necessarily. Chapter 11 bankruptcy is specifically designed to allow a business to continue operating while it reorganizes its finances and repays creditors over time. This is often the preferred path for businesses that are viable but burdened by debt.
How long does the bankruptcy process take?
How long does the bankruptcy process take?
A Chapter 7 case for a business might take several months. A Chapter 11 reorganization is a more complex process and can take from six months to several years, depending on the complexity of the case.
Important: These are historical ranges from past cases. Every situation is unique, and past results do not guarantee future outcomes. Results depend on specific circumstances, creditor cooperation, and available defenses.
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