Just as an individual may declare personal bankruptcy, so, too, can businesses enter bankruptcy proceedings should they become burdened by heavy debts. Financial problems end up crushing most new small businesses in the first decade of their existence, but this does not have to be the reality if your business is struggling and in need of a way out.

The Law Office of David J. Harris has been practicing business bankruptcy law for more than 30 years. When you rely on a lawyer such as David to help your business resolve its monetary issues, you know you are getting the opinion of a true expert.

David’s office will be here if you are going through a business bankruptcy in Wilkes-Barre, Scranton, Stroudsburg, or the greater Northeastern and Central Pennsylvania areas. For now, let us educate you in some basics of business bankruptcy, namely what it is and how it could proceed for you.

How Business Bankruptcy Works

Business bankruptcies are instituted for two primary reasons: liquidation or reorganization. The choice of the bankruptcy chapter chosen will depend on the business owner’s objective. 

Chapter 7 Bankruptcy

Businesses that file for chapter 7 bankruptcy are liquidated, or broken up. Once a chapter 7 case is filed, the debtor’s business operation must cease. Chapter 7 business bankruptcy cases are reserved for those businesses that have incurred debts that cannot be reasonably paid back from present or perceived future cash flows.  

Upon filing, a court-appointed trustee will take charge of the debtor’s assets with the goal of distributing to creditors the net proceeds from the sale of those assets. Finally, and depending on the form by which the business operates, a discharge may be issued. Where corporations, partnerships, and LLC’s do not receive a discharge, individual business owners and proprietors will receive a discharge.  Nevertheless, there can be valid reasons for a corporation, partnership, or LLC to file a chapter 7 case.

Chapter 13 Bankruptcy

Meanwhile, a business that files for chapter 13 bankruptcy will be reorganized but will still survive. However, Chapter 13 cases cannot be used for corporations, partnerships, or LLC’s. Chapter 13 cases are for businesses that are sole proprietorships, or are one and the same with their owners.  A business that files a chapter 13 bankruptcy case will repay some or all of its debt based on the size of its equity holdings, its income cash flow, and the type and extent of its debt. A repayment plan will be structured and supervised, but, at the end, the business emerges with a fresh start.

Chapter 11 Bankruptcy

Finally, small and large businesses may file a chapter 11 bankruptcy case if their income allows them to reorganize while paying off or discharging their debts. Chapter 11 bankruptcy cases require the entities to devise plans for the reorganization and repayments to creditors. Those plans are usually highly detailed and include proposals for paying some debts, taking relief from others, and ending various financial obligations to save money. The bankruptcy court must approve the plan before actions may proceed.

Chapter 11 bankruptcy cases are typically drawn-out processes that require significant commitments of time and effort. Businesses may emerge from chapter 11 situations in good financial health, but the work needed to get there sometimes deters businesspeople from seeking this avenue.

Business Bankruptcy Lawyer in Wilkes-Barre and Northeastern and Central Pennsylvania

No matter what type of business bankruptcy you are filing for, the details can be complex and confusing. This time in a business’s existence is stressful enough for the owners. However, when you depend on the experience of a seasoned professional, the process can be much easier for you.

David J. Harris is a business bankruptcy lawyer in WIlkes-Barre and Northeastern and Central Pennsylvania who has been helping businesses manage their debt for decades. Whatever your circumstances, whether you operate in Scranton, Hazleton, or further south, let the Law Office of David J. Harris work to give your company the most beneficial financial future possible. Contact him to set up a consultation and start the process today.