What Are The Different Types Of Bankruptcy My Business Can Consider?
If you currently own a business and you are considering bankruptcy, what types of bankruptcy are available to you? The answer to that question will depend in part upon the structure of your business, and the goals you have in filing for bankruptcy. Generally speaking, businesses are eligible for Chapter 7 and Chapter 11 bankruptcy, and sometimes businesses can be eligible for Chapter 12 bankruptcy or Chapter 13 bankruptcy in specific circumstances. Our West Palm Beach bankruptcy lawyers can provide you with additional information about your options under U.S. bankruptcy law.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a type of liquidation bankruptcy that is available to businesses, as well as to individual debtors who are able to pass the “means test.” While there is substantial information available about the “means test” requirement for Chapter 7 eligibility, it is important for business owners to know that a Chapter 7 business bankruptcy does not require passing the means test, including sole proprietorship bankruptcies in which a majority of the debts come from the business.
In a Chapter 7 business bankruptcy, all business assets will be liquidated to repay creditors, and the business will close. At the end of the process, the business will no longer be responsible for business debts.
Chapter 11 Bankruptcy
Different from Chapter 7 bankruptcy, Chapter 11 is an extremely common form of business bankruptcy that involves debt reorganization. Rather than liquidating business assets to repay creditors, the business comes up with a multi-year repayment plan through which business debts are reorganized, and the business can remain open during the Chapter 11 bankruptcy case. If the business completes the terms of the repayment plan successfully, the business can continue operating successfully after the close of the bankruptcy case.
Chapter 12 Bankruptcy
Chapter 12 bankruptcy is another type of reorganization bankruptcy that is simpler and less costly than Chapter 11 bankruptcy, but it is only available to business owners who can be accurately classified as “family farmers” or “family fishermen.”
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is not available to businesses; however, individuals who are in business as sole proprietorships may file a Chapter 13. In cases where a sole proprietorship needs to consider a reorganization bankruptcy, it may be possible to file for Chapter 13 bankruptcy in your individual name (and you will include your business debts in the reorganization plan) to avoid the higher costs associated with Chapter 11 bankruptcy.
Contact Our West Palm Beach Bankruptcy Attorneys
Do you need to consider business bankruptcy in South Florida? If so, an experienced West Palm beach bankruptcy lawyer at our firm can learn more about your circumstances today and can provide you with information about your bankruptcy options. Do not hesitate to get in touch to find out more about how we can assist you. Contact Kelley, Fulton & Kaplan to learn more.