If you are a part of a partnership or are a business owner, you may have thought, “I’ll never have to deal with company debt,” or “I’ll never default on the mortgage of my building.” Once, you may have even said, “I’ll never file for bankruptcy.”
Never say never.
The truth is, thousands of people file for bankruptcy every year — in 2013 alone, there were an estimated 1,071,932 filings. And they aren’t all individuals. Many businesses or partnerships go under, and the individuals involved need help getting their businesses and lives back on track. Chapter 11, the chapter designed to keep businesses alive, was filed 8,980 times in 2013.
Despite its negative connotation, filing for chapter 11 bankruptcy is actually an extremely responsible thing to do on the part of a business or company’s leader. Here is a run down on what it means to file Chapter 11.
Chapter 11 Bankruptcy Explained
Chapter 11 is frequently referred to as “reorganization” bankruptcy. This is because the debtor usually proposes a plan to repay its creditors over time, and to keep its bushiness alive. As in other bankruptcy cases, a bankruptcy trustee is appointed to supervise the assets of the debtor. Assets are not liquidized — instead, the restructuring plan changes the terms of the debt in order to allow the firm or company to continue to pay it back with future earnings.
What Happens If It Does’t Work
Ideally, restructuring debt would help a company to continue operating efficiently and quickly pay back its loans. If this is unsuccessful, a business may file for Chapter 7 bankruptcy and liquidate all their assets. Although the monetary fee for a Chapter 7 bankruptcy is small — only around $306 dollars — and there are advantages to having debt wiped clean, it is a major loss to have to close down a business for which you worked so hard.
No matter what, if you suspect that you can no longer handle your businesses debt burden, it is time to get help of some sort. Contacting your local bankruptcy attorney might be the right move to make to save you and your company for a financial ditch.