Business owners have several opportunities for managing and settling their debts. There are two primary bankruptcy chapters utilized by businesses. They are chapter 7 and 11. The choice between the two dictates whether or not the company continues operating during the bankruptcy case or not.
What are the Primary Differences
Chapter 7 is used by business owners and consumers to settle debts by liquidating their assets to generate adequate funds to pay off their creditors. In these cases, the court assigns a trustee to take possession of all properties and assets that are to be sold. The trustee takes measures to sell these items to produce the necessary capital needed to eliminate each debt overall. This equates to the value of the debt minus the exempted value assigned by the bankruptcy judge. He or she distributes these funds to the creditors and reports back to the court.
Chapter 11 is not a method of paying off debts. Instead, the debts are restructured. This indicates that the trustee assigned to the case discusses the debts with the creditors to change the terms. This includes loans, credit accounts and more. Basically, the trustee alters the terms of the debts to make them more affordable for the business owner based on the profits in which the company generated within the last six months to one year.
Duration of these Chapters
The chapter 7 bankruptcy will last up to six months. All debts are settled and are no longer the responsibility of the business owner. He or she cannot, however, operate the business during this time. All operations are stopped until the case has concluded.
Chapter 11 allows the trustee to monitor the debts to enforce the restructured terms. If at any time that he or she sees a pattern in which the business cannot manage their debts while continuing to operate, they may suggest to the owner that a chapter 7 claim is needed to prevent significant losses.
As a business owner, you must protect your interests and those of your clients. However, it is necessary that you manage your finances correctly, or you could become overwhelmingly in debt. If you need assistance with debt-relief, you should contact Bankruptcy Attorneys Marion IN now. If you wish to review these options for your company, you should contact Ripke Law PC to speak to Bankruptcy Attorneys Marion IN today.
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