Is My Business Eligible for Bankruptcy?

Business bankruptcy is understandably more complicated than personal bankruptcy for the primary reason that more people and more money are involved. This type of bankruptcy may arise from several circumstances such as poor management, wrong financial decisions, decrease in sales, increase in general costs, loss of clients, and credit-related problems. Businesses can file under Chapter 7 and Chapter 11. Here are some information on bankruptcy eligibility that will be of practical help for you.

Chapter 7 Eligibility

In Chapter 7, the company is put out of business completely. It stops all operations and its non-exempt assets are liquidated in order to pay the debts to creditors and investors. In order for a business to be eligible for bankruptcy filing, it must be a partnership or corporation. It should have the place of business in the United States. Chapter 7 relief is available regardless of the amount of debts and debtor’s solvency. A business may not file for Chapter 7 if the court recently dismissed the same bankruptcy petition 180 days before due to the debtor’s failure to comply with the bankruptcy rules such as to appear in front of the court.

Chapter 11 Eligibility

Commonly known as a reorganization bankruptcy, Chapter 11 is the option chosen by business owners who do not wish to give up the business completely. This bankruptcy type allows reorganization of debts and assets to be able to pay for the current outstanding balances. Corporations, business trusts, partnerships, limited liability companies, and unincorporated associations that have place of business in the United States are qualified for a Chapter 11 type of bankruptcy. However, businesses not eligible for Chapter 7 are also not eligible for Chapter 11.

Consulting a Bankruptcy Attorney

While it is true that most of the problems you and your company have in terms of financial obligations will be alleviated if you file for bankruptcy, it does not mean that it is the ideal solution to all types of business woes. It is important that you consult a reputable and experienced bankruptcy attorney not only to guide you through the process of filing but also to help you determine if this is a viable route for you. He/she may be able to present alternatives that may salvage your business without having to resort to bankruptcy. If not, your attorney will strive to make the bankruptcy case as less stressful for you as possible.