When world events present business interruptions, severed supply chains and reduced revenue, many businesses may think they have few options but to file for bankruptcy. Even when this route is the only option for your business, there are bankruptcy filings that could allow your company to restructure while working with creditors to provide payments without completely liquidating the company and its assets.
The difference in filing Chapter 7 vs. Chapter 11
One of the main differences between Chapter 7 filings and Chapter 11 is that Chapter 7 typically represents a liquidation of all the company’s assets to provide payment for owed creditors. Filing Chapter 11 bankruptcy, on the other hand, may involve concerted negotiations with creditors to see what options are available to pay off partial amounts of debt while keeping the business in operation, to produce more payments in the future for those creditors.
How Chapter 11 works
In some Florida cases, Chapter 11 could be involuntary when a creditor meets the conditions for filing for your company. In a voluntary filing, here are some of the main steps in the bankruptcy procedure:
- Filing a petition: The debtor company provides a statement of their financial affairs and then needs court approval to continue operations and pay employees. Filing costs include administrative fees and other filing fees.
- Reorganization: The debtor could remain in possession of the business to oversee a reorganization plan with the oversight of an appointed case trustee. The owner of the business is typically not permitted to remain in control of the company under a claim of fraud or mismanagement.
- Liquidations: In some scenarios, a Chapter 11 plan will include the liquidation of assets instead of reorganization to pay creditors.
Protecting your financial future
It’s difficult coming to terms with the lack of control that comes from a catastrophic business interruption. Unfortunately, these events occur and affect many companies in the same way. If you’re considering filing for bankruptcy, it’s essential that you contact an attorney with experience in bankruptcy law and Chapter 11 filings to guide you through this complicated process.