Filing for bankruptcy can be extremely confusing and complicated. To help you better understand what happens when you file for corporate bankruptcy, we’ve outlined the process below. For more information, talk to your local bankruptcy attorney.
In today’s economy, the word “bankruptcy” gets tossed around a lot… But what does it actually mean and what happens after your company files a bankruptcy. In layman’s terms, bankruptcy is when your company has financial obligations and liabilities that exceed your assets, making you unable to pay your bills as they come due. Filing for bankruptcy is a judicial solution for the debtor-your company-to seek relief from your creditors. The courts will determine if you are unable to satisfy your debts and, if so, attempt to determine a fair way to satisfy your creditors.
Filing for bankruptcy is similar to any other lawsuit: a bankruptcy petition simply starts the process, without guaranteeing any outcome or resolution. However, unlike other legal proceedings, a bankruptcy filing immediately generates an automatic stay, also known as bankruptcy protection. This injunction stops creditors from taking additional action to attempt to collect on their debts until the bankruptcy case is resolved. This stay essentially gives your business temporary relief and time to develop a plan for debt resolution.
As your corporate bankruptcy case proceeds, different creditors will be treated differently, but if or when the court declares your company bankrupt, the court will attempt to satisfy your financial obligations in an equitable and appropriate way.
Of course, just as every company is unique, every bankruptcy filing is different. Depending on the financial obligations, assets, and even structure of your business, your bankruptcy proceeding will unfold differently. Perhaps the most important question is whether to file a Chapter 7 bankruptcy or proceed with a Chapter 11 bankruptcy filing. The former dissolves your business, liquefying assets to satisfy creditors; the later involves reorganizing the business to regain solvency and profitability.
If you’re considering filing a business bankruptcy, now is the time to consult a professional bankruptcy lawyer. These specialized attorneys can help determine the right course of action for your particular company, helping your business achieve the best outcome given the circumstances. Contact your local bankruptcy attorney today-there may be non-bankruptcy options available for resolving your business debts!