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Whether or not to seek bankruptcy protection for your business can be a difficult and complicated decision based on a number of factors including scope of assets, amount of debt, cash flow and future business prospects. Bankruptcy Attorney Omar Zambrano routinely handle these types of matters and can help you make the right decision. Free consultation on all legal matters.
Only corporations, limited liability companies, and partnerships can be considered separate legal entities and file bankruptcy in their own right without involving the personal credit of the owner(s). These businesses can file Chapter 7 or Chapter 11 Bankruptcy. Sole Proprietorships on the other hand, are extensions of the owner and can’t file bankruptcy separately from the owner.
Although both individuals and corporations can file chapter 7, business bankruptcy cases often take a much different path than individual cases. The purpose of a business chapter 7 is typically to stop creditor attacks and orchestrate the orderly distribution of assets if any* to pay business debts. Although a business debtor does not get a discharge in chapter 7 the way an individual does, a corporation can still derive great benefit from the protection chapter 7 offers.
Chapter 11 Bankruptcy is designed to preserve ongoing business operations while formulating a repayment plan for business creditors. Bankruptcy reorganization in Chapter 11 requires a significant amount of time on the part of the owners, and managers to comply with the requirements of the bankruptcy system. Interacting with counsel, and negotiating with creditors is time consuming. Chapter 11 Bankruptcy is usually expensive as well and requires a significant commitment of resources.
Corporations can not file Chapter 13, it is only for individuals. However, for self-employed individuals even those with a corporation, chapter 13 can be a worthwhile option to consider. It can best be summarized as a court supervised repayment plan for the benefit of creditors. A chapter 13 debtor must devote all “disposable income” to his or her chapter 13 plan typically over 60 months. If 60 months of disposable income is not sufficient to repay creditors in full, the remaining balance due to creditors can be discharged upon completion of the plan.
Bankruptcy Attorney Omar Zambrano will take the time to understand your business and the challenges you may be facing. We explain all aspects and implications of business bankruptcy in language you can comprehend. Although our clients often ask us to make recommendations as to timing and type of bankruptcy, the ultimate decision is always yours to make. Business Bankruptcy is an often overlooked way for a business and its owners to survive challenging economic times and protect themselves from aggressive demanding creditors.