Are you someone who has been pondering over the financial health of your business? Do you think your business firm is knee-deep in debt and has no way out? If business debts have started interfering with your personal life, you might as well consider business bankruptcy options.
Besides the confusion that comes along with not understanding the legal jargon associated with bankruptcy, this is an overwhelming process. Before you choose bankruptcy in Orlando, read the concerns of this article to educate yourself on the heads and tails of bankruptcy.
Potentials reasons behind filing business bankruptcy
During tough times, when your business has no positive turnovers to look forward to, bankruptcy might be the sole option left. Here are a few reasons to file for business bankruptcy:
- To put down your shutters as soon as you can: If you file for bankruptcy, you no longer have to worry about concerns like selling off your inventory, collecting unpaid payments, or letting go of your business equipment. You can close your business immediately.
- To keep your company afloat: On the contrary, if you wish to keep your company operating, you can file for bankruptcy. This option will let you continue your business on a slower scale while reducing your debt.
But what are the causes of business bankruptcy? Well, you might be left with bankruptcy as the only option due to:
- Lack of favorable market conditions
- Hasty decisions taken in the past
- A dearth of adequate financing
- Problems in cash flow
Types of business bankruptcy you can file
CHAPTER 13 BANKRUPTCY
To be honest, Chapter 13 bankruptcy is more apt for individuals. However, sole proprietorship businesses can file for this type since these are indistinguishable from the business owners. If you want to just reorganize your debts rather than opting for liquidation, Chapter 13 is a viable option for you. The court will provide you with an alternative debt repayment plan and tell you how to repay your delinquent debts.
CHAPTER 7 BANKRUPTCY
When you foresee no future for your business, Chapter 7 is the best option. This bankruptcy type is also called liquidation. If your business debts are extremely overwhelming and you are sure you can’t pay them back even through reorganization, file for Chapter 7. Before the court approves this type for your business, the business owner has to pass the ‘means’ test. Once he qualifies, a trustee will be assigned by the court to possess all business assets and disburse them among creditors.
CHAPTER 11 BANKRUPTCY
In case you have a realistic chance of turning things around, Chapter 11 bankruptcy can be a worthy option. This type is commonly used by corporations and partnership businesses. Sole proprietors also use this type when their income levels are extremely high to qualify for a Chapter 13 debt repayment plan. In this type, the company will file for a detailed debt reorganization plan to repay its creditors.
Therefore, if you’re a poor business owner who is worried about the fate of your business, you may think of considering the above-listed bankruptcy options.