With the current economic situation is difficult, we have been hearing more and more about corporate bankruptcy in the news. But what exactly is bankruptcy and what does it mean when a company says it is filing for bankruptcy.
Bankruptcy is a legal filing that allows companies struggling to solve the problems of insolvency. Generally caused by a lack of cash flow, the presentation may be initiated by the company or creditors (called an involuntary bankruptcy). Once a case has been filed, the judicial system works to create a fair agreement between the debtor and its creditors.
Most business failures fall into one of four categories or types of presentations:
- Chapter 7: Liquidation bankruptcy "This guy is dissolved the company, selling its assets to pay all or part of their debts. Chapter 7 bankruptcy protection is generally used by companies with cash flow or intractable financial problems and small sole proprietorship.
- Chapter 11: The reorganization bankruptcy "This guy has the corporation through a period of financial and structural reorganization in order to regain profitability. The operations are typically simplified to reduce costs, some goods may be sold to satisfy creditors, and other changes are all options with this type of corporate failures. Chapter 11 bankruptcy filings are generally used by large and medium enterprises.
- Chapter 12 Bankruptcy: Bankruptcy for Farmers and Fishermen, this specialized form of business bankruptcy is designed for family farming and fishing operations, and is used less frequently than Chapter 7 and Chapter 11 bankruptcy.
- Chapter 13: Bankruptcy wage labor-often used in personal appearances, this type of bankruptcy can also be used for sun-owned enterprises. What allows them to pay their debts over a period of time (usually three to five years), Chapter 13 bankruptcy allows a company to maintain its assets.
If you are considering filing for corporate bankruptcy, check with your local bankruptcy attorneys before making any final decision. These professionals will be able to offer expert advice on the future of your business. Contact your area bankruptcy attorney today.
