You have been considering filing for bankruptcy as a business owner. The debt that your company is facing just does not match the amount that you are earning, and you cannot afford it. You know that bankruptcy can be used to eliminate that debt and give you a fresh start financially.
But does that also mean that you have to close the business and look for a new job or an entirely different career? Not necessarily. It depends on the type of bankruptcy that you choose.
Chapter 7 versus Chapter 11
For instance, with Chapter 7 bankruptcy, businesses have to liquidate assets. This is often used when the company is going to close. You sell off real estate, machinery, inventory, intellectual property and any other assets that you own. The money that is earned pays back a portion of the debt, and the rest is forgiven. But the business has to close because it no longer has any of these necessary assets and cannot continue operation.
With Chapter 11, however, you can propose a reorganization plan to creditors. Maybe your debt is simply unaffordable if you had to pay it all today, but you can set up a repayment plan over the next three years to address that debt. If you use Chapter 11, you do not have to liquidate your assets, so the business can continue operating and earning money, which is then put into the repayment plan.
Both types of bankruptcy can work, depending on the specifics of your situation, so be sure to carefully consider your legal options at this time.