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Bankruptcy Options For Business Owners

By: Robert Bain

Businesses large and small find it can be hard to stay afloat. The fact that there is so much competition is a huge factor. Toss in that the economy isn't well so consumers have to be careful of what they buy and you have more businesses filing for bankruptcy. Some of them have died at their own hand due to ineffective business practices or not handling their debts well. Regardless, the fact that bankruptcy is available means they may have a solution.

Bankruptcy can be really a difficult process so you need to make sure you have a good corporate lawyer on your side. Look for someone who specializes in this part of the law. That means they will be up to date on the various changes and how to apply the laws to your specific needs. There are different forms of bankruptcy that a business can file for.

Generally the category will be determined by the lawyer after a full assessment has been done. There are specific stipulations that have to be followed in order to file under a particular category. It also depends on how deep the financial problems run for the organization. Chapter 7 bankruptcy is the one that should be reserved only for the most serious cases.

If it is awarded by the court, all of the unsecured debts of the company will be forgiven. The secured creditors are paid often a lower amount as part of the settlement. There is very little chance for the business to survive though with this type of bankruptcy. There are some exemptions of what the business can retain but it doesn't leave them much to work with.

Chapter 13 is often one that small businesses use as they don't have the high dollar amount of debt. This generally allows some of the debt to be forgiven. For the most part though it has to be repaid but in small payments that a person can make. Again, the specifics of it will depend on what the circumstances are. The business may or may not remain open with such bankruptcy being filed.

There is also Chapter 11 which is used for those that definitely want to try to reorganize. Even large businesses such as airlines have used this to be able to stay afloat. With the economy at a low right now there are more companies filing for bankruptcy than ever before. Keep in mind that it will stay on the business credit report for a minimum of 7 years after it is filed.

Bankruptcy can be expensive as well so you need to have money aside for it. The costs of filing vary depending on location and the type of chapter you file under. There is also the high fees any competent attorney is going to end up charging you for their services. That should be a fee you are willing to pay though if you find bankruptcy is the right road to take.

There are several bankruptcy options for business owners but they should only be looked at when absolutely necessary. Use all other means first to be able to effectively resolve your issues. It can be an alternative when you just have no other choice though. It isn't something a business owner should take lightly or rush into though.

Article Source: Main Articles

Robert Bain is a seasoned business author. Read the ups and downs of small business credit, building business credit, aged and shelf companies and many more topics.

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