From the moment that you make a decision that bankruptcy might be the best choice for you, you might be feeling confused and concerned about the future of your case. Business bankruptcy, however, remains one of the best ways for somebody to be relieved of their debts that continue to pile up in the midst of managing their business. Bankruptcy is meant to be a special type of protection that can help you eliminate or repay a debt.
Today, we want to take a closer look at the three main types of business bankruptcy that you might see including Chapter 7, 11, and 13 bankruptcy. We will look at how they relate, how they are different, and give you a better idea of what should work for you.
The Types of Business Bankruptcy
Chapter 7: If you are looking to file for business bankruptcy, the type of bankruptcy that you most commonly see is Chapter 7, which is also referred to as “liquidation.” This specific process makes up about 80% of all business filings and is available to many types of business owners across Texas and beyond. If you have no means to financially support your business any longer and you cannot pay off your current debts, this is likely the type of bankruptcy that you will choose for your business. This process will help you liquidate all of your assets and essentially close down your business so that you can have a fresh slate.
If closing down the business is something final for you and you intend to shut down and dismiss all employees, then you might consider this option. However, to qualify, you must be able to show that your income is low enough and meets certain requirements, which you will discuss with your attorney.
Chapter 11: Chapter 11 bankruptcy is known as “reorganization” and allows a business to continue operating while debts are being reorganized. If you plan on keeping your business but running it an entirely different way with a fresh start, this might be the best option for you. In this type of bankruptcy, management will stay with the company and will continue to make decisions for the company. However, through bankruptcy, the business will be able to eliminate debt and work toward its future.
The end goal associated with Chapter 11 is making sure that your business will continue to operate in the future. You will continue to build income and work toward success.
Chapter 13: Chapter 13, lastly, is known as “reorganization” and usually affects consumers. Small businesses will use this type of bankruptcy as a way to get back on track. However, there are debt limits saying that, if you want to qualify, you can’t have more than $394,725 in unsecured loans or $1,184,200 in secured loans. Just as with Chapter 11, your business will continue to operate while you are going through this process. You will have around 3-5 years to pay back your debts.
At M.J. Watson & Associates, we have worked with many clients who are looking forward to getting back on track in their business through a bankruptcy filing. Whether you are looking to file Chapter 7 bankruptcy or going with another option, our experienced bankruptcy attorneys in Texas are willing to help you through this process and point out all aspects you might have missed. Please contact us at 817-877-2861 for more information.