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What Is Commercial Bankruptcy?

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Many different types of bankruptcy exist under U.S. bankruptcy law, and various parties can be eligible for bankruptcy. The terms “consumer bankruptcy” and “personal bankruptcy” are often used to describe bankruptcy cases filed by individuals or married couples. Differently, the terms “business bankruptcy” or “commercial bankruptcy” or “corporate bankruptcy” can be used to describe bankruptcy cases filed by businesses. While consumer and commercial bankruptcy cases can be similar in multiple ways, there are important distinctions. Yet it is important to know that a “commercial bankruptcy” is not a specific form of bankruptcy, but rather refers to the entity or party filing for bankruptcy.

Within the realm of commercial bankruptcy, multiple types of bankruptcy may be available. Our West Palm Beach business bankruptcy attorneys can provide you with the information you need to know.

Different Terms for Commercial Bankruptcy 

You should know that commercial bankruptcy, business bankruptcy, and corporate bankruptcy are all terms that refer to the different types of bankruptcy for which a business can be eligible. To be clear, there is no distinction among a commercial, corporate, and business bankruptcy—all of these terms refer to the possibility of a business entity seeking bankruptcy protection.

In a commercial bankruptcy case, the chapter under which a business can file may be dictated by the business structure. For most types of businesses, it may be possible to file for Chapter 7 or Chapter 11 bankruptcy. These types of bankruptcy typically are available for partnerships, limited liability companies (LLCs), and corporations. Sole proprietorships also may be eligible for Chapter 7 or Chapter 11 bankruptcy, but these types of businesses also may be eligible for Chapter 13 bankruptcy since the business and the owner are the same entity.

Chapter 12 bankruptcy eligibility is not based upon the business structure, but rather the nature of the business. This type of bankruptcy is intended for family farmers or family fishermen that have a regular annual income. The family farm or family fishing business may be structured as a corporation or a partnership, but an individual (as well as an individual and a spouse) may also be eligible to file for Chapter 12 bankruptcy if they meet the definition of family farmers or family fishermen outlined by U.S. bankruptcy law.

How Commercial Bankruptcies Differ from Consumer Bankruptcies 

The distinctions between commercial and consumer bankruptcies vary, and those distinctions depend upon the type of bankruptcy being filed.

With Chapter 7 bankruptcy, one of the major distinctions between commercial and consumer bankruptcy is that a business does not receive a debt discharge, while a consumer does. In both cases, the business or consumer no longer owe the debts, but the business closes while a consumer receives a discharge.

In Chapter 11 bankruptcy cases and other types of reorganization bankruptcy, commercial and consumer bankruptcy cases look quite similar to one another in that debts will be reorganized and the debtor will make payments according to a court-approved payment plan.

Contact a Bankruptcy Lawyer in West Palm Beach 

If you have questions about filing for commercial bankruptcy, you should contact one of the experienced West Palm Beach commercial bankruptcy attorneys at Kelley, Fulton & Kaplan for more information.

Sources:

uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-7-bankruptcy-basics

uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics

uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-12-bankruptcy-basics#:~:text=Chapter%2012%20is%20designed%20for,or%20part%20of%20their%20debts

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