Business Bankruptcy

Chapter 11 Business Bankruptcy ExplainedA business bankruptcy can take a number of forms. In a Chapter 7, a corporation may file bankruptcy in order to seek the orderly liquidation of its enterprise. In a Chapter 7 bankruptcy, generally the corporation is liquidated and ceases its business functions. The assets of the business are sold and distributed among the creditors of the corporation. Despite the belief of many, including many bankruptcy attorneys, a corporation does not receive a discharge in a Chapter 7 bankruptcy.

There are benefits for a corporation in filing a Chapter 7 bankruptcy. However, there are many instances where the filing of the Chapter 7 bankruptcy for a corporation has little benefit and only serves to generate unnecessary attorney fees and costs to the corporation.

A business bankruptcy also can come in the form of a Chapter 11 bankruptcy or reorganization. In terms of a business, only a corporation can file Chapter 11 bankruptcy.
Some of my clients who have businesses find that neither a Chapter 7 bankruptcy nor a Chapter 11 bankruptcy is beneficial to their goals. Most of my business bankruptcy clients want to continue the operation of their business, and concurrently, receive some relief from their debts. A Chapter 7 bankruptcy often leads to the liquidation of the business and the costs associated with the filing of a Chapter 11 bankruptcy are often prohibitive.

Although a corporation cannot file a Chapter 13 bankruptcy, an individual can. Many small businesses operate without a corporate shield, as small proprietorships. For example, Danny Robinson doing business as ABC Pest Control can file a Chapter 13 bankruptcy and reorganize both his personal and business debts within the one device of Chapter 13.

Another option for a corporation may be to dissolve the corporation and thereafter operate as a small proprietorship, such as Danny’s Pest Control. Thereafter, the debtor may file a Chapter 13 bankruptcy to reorganize his debts. One must be careful, however, in using this technique, and definitely consult my office before engaging in such a maneuver.

My name is Jay Weller and I have practiced bankruptcy law since 1993. If you are in need of a business bankruptcy, or have any other needs relating to debt, please contact me directly at 1-800-407-3328 (DEBT) or through my website at I will be happy to discuss your case with you personally.

Image credit: succo