Business Bankruptcy Frequently Asked Questions and Answers
Alfred Abel Law Offices business bankruptcy attorneys have helped hundreds of businesses across Pennsylvania file for bankruptcy protection. If your business is facing financial difficulties you may be seeking information about bankruptcy relief for your business. Below, we answer some business bankruptcy frequently asked questions we hear from our clients.
Q: What types of bankruptcy options are available to a business?
Depending upon the organizational structure of a business, there are four main types of bankruptcy options. Set forth under the United States Bankruptcy Code, these options are:
• Chapter 7 Business Liquidation
• Chapter 11 Business Reorganization
• Chapter 12 Bankruptcy for Farming and Fishing Businesses
• Chapter 13 Bankruptcy for Individuals (Sole Proprietors)
Q: What are the differences between a business bankruptcy under Chapter 7, 11, 12 and 13?
A Chapter 7 business bankruptcy involves the dissolution of your company, using its assets to pay off a percentage of your debts and discharging the rest.
Chapters 11 and 13 both allow businesses to continue operations while implementing a reorganization plan to pay off the debts and financial obligations, but Chapter 13 is only permitted for individuals operating as sole proprietors since business and personal debts are considered the same.
A Chapter 11 bankruptcy allows more flexibility than Chapter 13, but is more expensive, and is designed for bigger businesses or for individuals with substantial assets. Chapter 13 is generally seen as preferable for smaller, owner-operated businesses.
A Chapter 12 bankruptcy is similar to a Chapter 13 but is specifically designed for family farming and fishing operations. By filing Chapter 12, a family farm or fishing business can remain in business while restructuring debts and obligations.
Q: What does a bankruptcy trustee do?
When a business files for bankruptcy, the court may appoint a bankruptcy trustee to oversee the bankruptcy process which includes payments to creditors, the liquidation of business assets, and tracking progress of a bankruptcy against benchmarks. The role of a bankruptcy trustee varies according to the type of business bankruptcy.
Q: Can a creditor force a business into bankruptcy?
Yes, a creditor could possibly force a business into Chapter 7 or Chapter 11 bankruptcy in the event the business is in financial trouble. If the creditor has a judgment against the business for the unpaid debt that is not in dispute, then the creditor can pursue filing an involuntary bankruptcy petition. The creditor will need to find other creditors to join petition for an involuntary bankruptcy, and there are penalties for doing it incorrectly.
Q: Will personal debt incurred on behalf of my business be discharged in bankruptcy?
If you personally guaranteed a business debt for a corporation, LLC or other business entity, your personal liability won’t be discharged in a bankruptcy case for the business. Only the business liability will be discharged. This is also true if you used personal credit cards for business purchases. If you have incurred a number of personal financial obligations related to your business, a personal bankruptcy could be an option for you.
Q: Will filing a business bankruptcy affect my personal finances?
In most cases, filing business bankruptcy will not affect your personal finances. Since your business is a legally distinct entity from yourself, filing a business bankruptcy will normally be kept separate from your personal affairs. Some exceptions do apply.
Get Your Business Bankruptcy Frequently Asked Questions Answered at Alfred Abel Law Offices
The attorneys at Alfred Abel Law Offices are dedicated to providing clients in Philadelphia, Pennsylvania and the surrounding areas with practical and effective legal advice. With more than 30 years as a bankruptcy attorney, Alfred Abel, Esq. has the skills and expertise necessary to meet the diverse needs of companies and businesses facing bankruptcy. Contact us at 215-517-8300 for the answers to more business bankruptcy frequently asked questions or to schedule your consultation.