Business Bankruptcy - article about Business Bankruptcy

Some Useful Information On Business Bankruptcy

When a business goes bankrupt then lives are affected and some lives can be ruined. If the business was not incorporated then the bankruptcy affects the personal assets of the owner as well as the lives of the people that worked for the company that no longer have a job. A business bankruptcy is a pretty traumatic event and it can usually come in two different types. Most companies that experience a business bankruptcy do so through a Chapter 11 and a Chapter 7. If you hear that a business bankruptcy is a Chapter 11 then keep your chin up as there is still some hope. If a business bankruptcy is a Chapter 7 then you should probably pack your desk and get your resume together because it is pretty much over.

Chapter 11

Most people that experience a business bankruptcy will try a Chapter 11 before they try anything more severe. A Chapter 11 business bankruptcy is a long and drawn out process that first looks at the assets of the company and the income the company is generating. The court comes up with a plan to use the company's assets and income to begin paying back creditors and restructures the company to assist the company in paying back the debt it owes. With the court on its side the company can bypass certain payment rules and the creditors must agree to work the company in some way if they are to get any of their money back. The creditors are usually asked to make concessions that allow the company to pay back its debt but at a greatly reduced value.

The company and the court then agree on a plan that will allow the company to still exist in its day to day operations but under the supervision of the court. The company will attempt to create a plan that will allow them to become profitable, pay off existing creditors, and being and maintain relationships with suppliers that are beneficial to both sides and profitable for the company. The court must approve everything the company does and will remain as a monitor for the company until all of the plan goals are met and the company can effectively emerge from Chapter 11 with a new start. A business bankruptcy done this way can work but it should be noted that many companies that emerge from Chapter 11 eventually wind up going out of business.

Chapter 7

A Chapter 7 business bankruptcy is a lights out bankruptcy where the court will discharge some of the company's debt and then order all the assets of the company to be liquidated to satisfy as much of the remaining debt as it can. When a company files Chapter 7 then that is it and the company will sell its assets off and go out of business. Chapter 7 is not meant to help a company restructure its debt.

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