Over the past two decades, business owners across the country have faced unprecedented financial difficulties. It is crucial to think of practical solutions for insolvency when faced with such situations. These solutions could include debt restructuring or liquidation in today’s volatile markets.
Small businesses have relief options. Businesses that want to achieve financial stability can benefit from the guidance of an experienced bankruptcy lawyer who is familiar with constantly changing laws.
Types of Bankruptcy Filings
Two basic bankruptcy options for small businesses are Chapter 7 and Chapter 11 according to the Federal Bankruptcy Code.
Chapter 7
A court-appointed trustee is appointed to oversee the liquidation and payment of debt. This hierarchy places secured debt repayments such as collateral loans above unsecured debt due to bondholders or shareholders with preferred stock. The remaining debt will be discharged once all assets have been sold.
Chapter 11
A Chapter 11 filing will allow the debtor to remain in possession and act as a trustee while creditors negotiate a restructuring of the repayment. Once all parties have agreed on the plan, it is approved by the court. Once the plan is agreed upon by all parties, the court will approve it. The debtor may also borrow money from the court to assist with the reorganization. This filing allows the debtor to agree to pay at least a significant portion of the debt within a three to five-year period to make them solvent again.
This post was written by Trey Wright, one of the best bankruptcy lawyers in Tallahassee! Trey is one of the founding partners of Bruner Wright, P.A. Attorneys at Law, which specializes in areas related to bankruptcy law, estate planning, and business litigation.
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