No company goes into business thinking that they’ll have to file bankruptcy, yet for businesses across the country, it can become the best option. Most people assume that there’s just a single reason companies file: They’re dealing with financial difficulty. The reality is that it’s not always that simple.
Chapter 11 bankruptcy, also known as business bankruptcy, is a big decision. It will have long-term effects on your business and at The Law Offices of Paul Y. Lee we recommend that you think hard about it before deciding it’s the right decision for your company. Depending on the facts about your business, such as how you’re structured, how high your debt is, and how you see the business moving forward in the future, there may be a better option – such as filing Chapter 7 or Chapter 13.
There may even be ways to work out an arrangement with your creditors. When you work with The Law Offices of Paul Y. Lee, you can rest assured that you’re working with an experienced legal team who can carefully consider your options and give you the details you need to compare them. Read on to learn the three situations in which it may make sense to file Chapter 11 and then reach out to us at 951-755-1000 to let us help you find the right option for your company.
You’re an entity other than a sole proprietor
Federal bankruptcy laws prevent certain types of business entities (such as LLCs and corporations) from filing Chapter 13. As a result, Chapters 7 and 11 are generally the only options for a business owner who’s not a sole proprietor.
You’re looking money to lawsuits
One of the reasons that companies file Chapter 11 is because they’ve either been threatened with or served lawsuits. If the cost of legal fees is putting a serious strain on your company, then Chapter 11 will typically stop any pending litigation. This is due to the “automatic stay” which offers relief. Remember that trying to avoid litigation can’t be your only reason for filing. If it is the only reason, then your bankruptcy is likely to be dismissed and you’ll be right back where you started.
You want to keep your company running
Chapter 7, whether it’s filed by a person or a company, is a liquidation bankruptcy. While an individual can exempt certain property from this type of bankruptcy, the same is not true of businesses. Filing Chapter 7 for a business results in the entirety of their assets being liquidated and eh business closing. As a result, Chapter 7 may be a great choice if you don’t want your company to keep running. If you do, then Chapter 11 is likely a better option.
No matter how you decide to move forward with bankruptcy, it can be a very long and complex process. You need an experience professional at your side. You can find that pro at The Law Offices of Paul Y. Lee. Call us today at 951-755-1000 for a free bankruptcy consultation. We can go over your situation and offer you the best choices for moving forward.
