Bankruptcy
Debtor Bankruptcy Overview
Perhaps one of the most difficult questions an individual or business owner can ever consider is whether to file for bankruptcy. Individuals can be faced with daunting financial pressure from managing their own business, personal guarantee(s), leveraging their personal assets to finance a business or an investment, adverse judgments and/or the inability to service personal financial obligations. Business owners typically have poured their hearts and finances into a business, and oftentimes the finances of the business are intertwined with the business owner’s personal finances.
Businesses may consider bankruptcy for numerous reasons: an adverse judgment is threatening the ongoing viability of the business, the business wants to appeal an adverse judgment to avoid posting a bond, their largest client went out of business, employees embezzled money, or the accounting department didn’t pay the necessary taxes. In any case, this difficult decision can seem frightening and overwhelming. As a business owner, knowing about the different types of bankruptcy options can help you make the right decision for your business.
Bankruptcy Options
There are two types of bankruptcy options that Goe Forsythe & Hodges LLP specialize in – Chapter 7 and Chapter 11. An individual or a business can file either a Chapter 7 liquidation bankruptcy or a Chapter 11 reorganization bankruptcy. A Chapter 7 bankruptcy is used if an individual or a company is unable to meet its financial obligations and is going out of business. A Chapter 11 bankruptcy is where the individual company has financial challenges but can create a restructured debt payment plan and still stay in business.
- It gives time and breathing space to get finances in order to allow the individual or business to regain its footing and reemerge profitably
- Prevents certain creditors from seizing assets
- Allows for an individual or business to appeal an adverse judgment without posting a bond
- Businesses can continue to operate as normal
- Businesses can reduce or spread out payments
- Postpones the foreclosure process long enough that the individual or business can either sell or develop the real estate through the bankruptcy and reorganization process
- Individuals or businesses can propose and establish a reorganization plan regarding all their debts, and ultimately reduce any operating expenses to levels that are reasonable and acceptable
- Individuals or businesses can choose to surrender or keep the secured property
- Provides the possibility of terminating leases in unprofitable locations
- Allows for renegotiation or completely get rid of union contracts
- Allows leases to be renegotiated (although this is complex, leases are automatically deemed rejected if not renewed within 60 days)
Ultimately, a Chapter 11 bankruptcy is time-consuming, legally complicated, and more expensive than a Chapter 7 bankruptcy. However, with a Chapter 11 bankruptcy, an individual can avoid liquidation, or a business owner is able to keep a company open and operational, hopefully, to grow and profit in the future. If the proposed reorganization plan is accepted and approved by all creditors, then it becomes a new legal contract with all the individual or business’s creditors, and certain debts prior to the Chapter 11 bankruptcy are discharged.
Consult an Experienced Bankruptcy Attorney
Navigating bankruptcy law can be complicated. Make sure you make the right choices with your bankruptcy proceedings and contact the experienced bankruptcy attorneys at Goe Forsythe & Hodges LLP.
Our legal team has years of experience to let you know not only about the bankruptcy process, but also which bankruptcy would be best for your company’s unique financial situation. Contact the bankruptcy attorneys at Goe Forsythe & Hodges LLP at 949.798.2460 or via email today for a consultation.