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Business Bankruptcy

Business Bankruptcy – Chapter 7, Chapter 11

When a business is unable to service its debt or pay its creditors, the business or its creditors can file with a federal bankruptcy court for protection under either Chapter 7 or Chapter 11.

Both individuals and businesses are eligible to file for Chapter 7 bankruptcy protection. A business Chapter 7 will liquidate the company’s assets to pay off its creditors.

A Chapter 11 bankruptcy case is usually a proceeding for the reorganization of a debtor engaged in a business.  Under some circumstances, it is available to consumers as well.  Under Chapter 11, the Debtor is typically a business that is seeking to reorganize its debts in such a way as to enable the struggling business to continue operating into the future. The business may be a corporation, sole proprietorship or partnership.  A corporation exists separate and apart from its owners, the stockholders. The Chapter 11 bankruptcy case of a corporation (corporation as Debtor) does not put the personal assets of the stockholders at risk other than the value of their investment in the company’s stock.  A sole proprietorship (owner as Debtor) on the other hand does not have an identity separate and distinct from its owner(s).  A bankruptcy case involving a sole proprietorship includes both the business and personal assets of the owners-debtors.

Chapter 11 affords the Debtor in possession with a number of mechanisms to restructure its business. A debtor in possession can acquire financing and loans on favorable terms by giving new lenders first priority on the business’ earnings.  The court may also permit the debtor to reject and cancel contracts. Debtors are also protected from other litigation against the business through the imposition of an automatic stay.  While the automatic stay is in place, creditors are stayed from any collection attempts or activities against the debtor and most litigation against the debtor is stayed (put on hold) until it can be resolved by the bankruptcy court.

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Daniel L. Freeland & Associates, P.C., Highland, Indiana attorneys specializing in business bankruptcy and reorganization can assist your business in working with your creditors and provide you with a customized debt relief plan.  We will help you to keep your business open while you repay debtors and attempt to return to profitability or we can help the business close down.  We have worked with businesses in Northwest Indiana and surrounding communities.

Your decision to file for bankruptcy depends upon numerous factors and requires close consultation with knowledgeable attorneys. To schedule a free initial appointment with Daniel L. Freeland & Associates, P.C., call us at 219-922-0800 or contact our Highland, Ind., office online.