Leinart Law Firm

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Marcus Leinart

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Business Bankruptcy

Federal bankruptcy laws determine how companies go out of business or recover from crippling debt. Businesses can file for bankruptcy under Chapter 7, 11, or 13, depending on the way the business is structured and other factors. An attorney who practices bankruptcy law can help you determine which is the best method of dealing with overwhelming business debt.

Under Chapter 7, the company stops all operations and goes completely out of business. A trustee is appointed to "liquidate" (sell) the company's assets and the money is used to pay off the debt, which may include debts to creditors and investors.

Most publicly held companies will file under Chapter 11 rather than Chapter 7 because they can still run their business and better control the bankruptcy process. Chapter 11 provides a process for rehabilitating the company's faltering business. Sometimes the company successfully works out a plan to return to profitability; sometimes, in the end, it liquidates. A bankrupt company, the "debtor," might use Chapter 11 of the Bankruptcy Code to "reorganize" its business and try to become profitable again. Management continues to run the day-to-day business operations but a bankruptcy court must approve all significant business decisions. Under Chapter 11 reorganization, a company usually keeps doing business and its stock and bonds may continue to trade in our securities markets.

Businesses run as a sole proprietorship or as a corporation, can use Chapter 13 to stay in business and pay off its debts. Chapter 13 is the proper option for most businesses experiencing debt problems that want to continue operations. It can also provide a solution for business owners who have personal debt related to the business.

If your business is experiencing financial difficulty, you should contact a bankruptcy attorney to consider your options. Each financial situation is different. A consultation is free and can be conducted over the phone. Contact us today at 1-800-518-DEBT (3328) for a free, no obligation consultation. You can also send us an email, submit an online Case Evaluation , or schedule an appointment online.