Business owners in Alabama may be able to file for Chapter 7 or 13 bankruptcy to discharge debts incurred by their companies. In some cases, it may make sense to file for Chapter 11 protection to reorganize corporate debts.
When to file for Chapter 7 bankruptcy
A liquidation bankruptcy may be appropriate if your company is organized as a corporate entity or LLC. During this type of proceeding, the firm’s assets will be sold at auction, and the money raised will be used to pay off your creditors. If you have personally guaranteed any of your organization’s debts, your own assets may be sold off in an effort to reimburse your lenders. After nonexempt property has been sold, the company will be forced to cease operations.
When to file for Chapter 13 bankruptcy
Individuals and sole proprietors are allowed to file for Chapter 13 protection to reorganize business debts. Of course, this is only true if their debts are less than the limits imposed in the year that such protection is sought. An attorney may be able to help you determine if you are eligible for this type of proceeding.
Is a Chapter 11 proceeding an option for your company?
In most cases, corporations must file for Chapter 11 relief if they want to reorganize existing debts. This is generally true regardless of how large their companies are. In a Chapter 11 proceeding, your firm can renegotiate contracts with lenders, vendors and employee unions. It may also be possible to cancel debt payments or take other steps to improve the company’s finances. In many cases, these moves can make your business more competitive in the short term, which may help it succeed in the long term.
If your business is struggling financially, it might make sense to seek protection from creditors. An attorney may be able to help you file bankruptcy paperwork, provide more insight into the different types of protection available and take other steps to meet your needs.