Businesses, whether big or small, can fail for many reasons. Filing for bankruptcy helps to get protection against the hounding creditors and to find a positive way to repay piling debts.
Three types of bankruptcy exist. What suits your case is best decided by a small business bankruptcy lawyer in MD. It is smart to contact a lawyer and then move ahead.
Are you a sole proprietorship?
The law considers them as legal extensions of the business owner. He/she is responsible for all liabilities and assets of the company. As a sole proprietor, you can file for Chapters 7 or 11 or 13.
Are you a partnership or corporate house?
The law considers partnerships and corporate houses as legally separate entities from the business owners. A company has a choice to file for Chapter 7 or 11.
Chapter 7
If your wish to shut down the business, filing for Chapter 7 is good. This is also regarded as liquidation. This choice is good when your business debts are overwhelming and you see no way they can be restructured.
Also, in case your business has no substantial asset, Chapter 7 is a good choice. The chapter denotes dissolving the business. When you file under this chapter, the court appoints a trustee who takes possession of your business assets and distributes them among your creditors.
Once all creditors are paid, along with the trustee, you, as a sole proprietor, obtain a “discharge” from the court. This signifies the end of the case. Now, you are free from all obligation of debts. Phew!
Corporate houses and partnerships don’t receive “discharge.”
Chapter 11
If you don’t wish to shut down the business, but need a second chance to run it more efficiently, Chapter 11 is for you. This is regarded as business reorganization. Your business might be under debts, but you still run it under supervision of a trustee appointed by the court.
As the business owner, you must submit a plan of reorganization of debts in detail to the court. Your bankruptcy lawyer will help you prepare this plan. The court will ask your creditors to vote on your plan. If the court finds your plan equitable and fair, it will approve it.
Reorganization gives you time, which may exceed 20 years, to pay your creditors. This gives you enough time to “fix” your failing business and bring it back on track.
Chapter 13
Chapter 13 is solely for consumers. Sole proprietors can also use it. When an individual is under piling debts, he or she can declare themselves bankrupt to find relief from hounding creditors.
The court will protect you by issuing a stay that will disallow any creditor to collect debt from you for a given period.
The amount you need to repay is determined on the basis of your income, your properties, and others. The lawyer will sit with you and calculate the money left after deducting your monthly expenses on necessities and will decide upon the monthly amount.
Whether you are an individual, big corporate house, or a small business, bankruptcy lawyer in MD can help you start your financial life afresh without worries and unnecessary tensions.
Resource Box:
Rnnlawmd.com is one of the best places to contact an experienced small business bankruptcy lawyer in MD. Log on to the site for more information.