Learning About Bankruptcy Proceedings

Debt-ridden Businesses Can And Should File Chapter 7 Bankruptcy

by Seth Beck

Any type of business can file for Chapter 7 bankruptcy, which is a liquidation bankruptcy that wipes out most of business debts. This is actually a good move for businesses that are debt-ridden and have little income--businesses that have income so inadequate that there is little chance of being able to repay debts and continue running. While there may still be some debts left to pay, in many cases Chapter 7 can be a business's best move.

Filing Sooner Rather Than Later

Don't wait to file Chapter 7 bankruptcy. Filing does not carry the stigma it once did, so as soon as serious financial troubles begin, consult with a Chapter 7 bankruptcy attorney. If you have the meeting soon enough, the attorney may actually be able to suggest things you can do to avoid bankruptcy (if that is something you desire). If your financial situation is bad enough, your creditors have the right to force you into bankruptcy by filing an involuntary Chapter 7 bankruptcy.

The attorney can advise on you on certain bankruptcy actions you want to avoid because they can diminish the amount of potential bankruptcy benefits. 

Sometimes Bankruptcy Is Best

If your business is in financial trouble, bankruptcy may be your best response in certain situations:

  • Secured creditors are threatening to take their collateral
  • Business landlord is threatening to evict you
  • Your business owes more to creditors than it can pay
  • Creditors are unwilling to negotiate repayment plans
  • Your business owes back taxes, and the IRS is threatening you

The IRS can seize your business or personal property by taking money from your bank accounts or liquidating your business assets and shutting it down. 

Bankruptcy Has Disadvantages

While bankruptcy can be the answer to financial problems of your business, it does comes with some disadvantages:

  • Damages your business credit
  • Damages your personal credit
  • Makes getting new credit with low interest rates difficult for at least 7 years

It can be tough to rebuild a business after a bankruptcy, but it with proper planning it can be done. 

Making the decision of whether your business should file for Chapter 7 bankruptcy is not always an easy one. This is why any business trying to make this decision should discuss their financial situation with a bankruptcy attorney. Whether or not you lose property or face other difficulties when filing can vary by the type of business you have. The outcome may differ depending on whether your business is a sole proprietorship, partnership, or corporation. 

For more information about filing bankruptcy, visit a website like http://www.howardgoodmanlaw.com/.