Businesses are not easy to run. Business owners work hard to be successful and make a profit. Running a business can sometimes not always go as planned. If a business finds itself struggling financially, its owner may have to look into filing for bankruptcy. Doing so can help a business out of a hard time. When facing bankruptcy, it is important to enlist an experienced attorney that can explain your options and find a situation best for your business.
Chapter 7 Business Bankruptcy
When a business owner files for Chapter 7 Bankruptcy, it requires the business to liquidate its assets. This is so that the owner may pay off any outstanding debts. This can be done if a business is not worth more than these debts. In order to do so, the business owner must file a petition that provides the Bankruptcy Court with their assets, liabilities, current income, expenditures, contracts, and leases. A business can file for Chapter 7 if it is in one of the following situations:
- It has little to no potential of profit
- Its debts are worth more than its assets
- It is not possible to restructure debts
When this process is successful, a business may be cleared of its remaining unsecured debts. Unfortunately, in many cases, it typically ends with the business closing.
Chapter 11 Business Bankruptcy
When filing for Chapter 11 Bankruptcy, a business is allowed to stay open and functioning. Doing so allows it to continue making an income and keep employees. With Chapter 11, a 5-year payment plan is created that enables the business to restructure their debt and pay it over time. The Bankruptcy Court protects the business during this process so creditors and banks cannot shut it down. When this process is successful, the business will make a profit again when their debt is paid. When a business owner files for Chapter 11, a petition must be filed that includes a list of assets, liabilities, and any outstanding contracts or leases.
When businesses are struggling with their finances, an owner may be quick to look towards bankruptcy to try and save it. While bankruptcy is sometimes the best option for a business, there are also other options that may work best for certain circumstances. Sometimes, banks or creditors will work out a financial situation with a business that allows owners to restructure their debts and pay them outside of Bankruptcy Court. These options allow a business to repay debts in a way that works best for the owner.
When bankruptcy is filed, the Bankruptcy Court enforces the “Automatic Stay.” The Automatic Stay prohibits creditors from collecting any assets of a business. Collection activities may consist of lawsuits, calls/letters, bank restraints, or repossessions. This gives the business owner a bit of breathing room as they work to pay back their debts. Benefits of the Automatic Stay are:
- It is filed immediately
- Collectors cannot pursue debts
- Prevents harassment
- Gives you room to breathe while recovering stability
Contact our Firm
If you or a family member is considering filing for bankruptcy and need the help of a skilled attorney, contact Detzky, Hunter & DeFillippo, LLC. today.
Detzky, Hunter & DeFillippo, LLC is an experienced law firm that has proudly served clients across New Jersey for decades from their convenient locations in Freehold and Somerville. If you need strong legal guidance, contact us today to schedule a consultation. We are lawyers who listen, counselors who care.