The Cassidy Law Firm Blog

Tuesday, June 17, 2014

Monmouth County Business Bankruptcy – What You Need to Know

Fortunately, in the 21st century no one goes to debtor’s prison when they are unable to pay their bills. Even a business can file for bankruptcy protection when it becomes clear the business cannot remain afloat without pursuing bankruptcy. If you own a small business and are struggling financially just to keep the business afloat it may be time for you to consider bankruptcy. A business may file chapter 7 just like an individual debtor can.

Monmouth County Business Bankruptcy

After deciding to pursue bankruptcy, the next decision that must be made is which chapter to use to file the bankruptcy petition. Larger businesses often use chapter 11 because it protects most of the business’s assets. For a smaller business bankruptcy, or one that is not concerned with the protection of assets, chapter 7 may be used. In recent years the number of small businesses filing chapter 7 bankruptcy has reached record highs, due in large part to the economic recession the country has suffered through. The biggest benefit to filing using chapter 7 is that most of the business’s debt are discharged, or eliminated, at the end of the bankruptcy. In addition, the business will likely be able re-affirm important debts for property, equipment, or other business assets.

The biggest drawback to using chapter 7, however, is that the non-exempt assets owned by the business (and possibly the owner depending on the structure of the business) can be seized by the bankruptcy trustee, sold, and the profits distributed among the creditors. Chapter 7 is known as a “liquidation” for this reason.

If chapter 7 is used the business will file a petition in the appropriate bankruptcy court. Immediately after the petition is filed the court will issue an automatic stay ordering all creditors to cease and desist any further attempts to collect on a debt owed by the business. The trustee will look over the bankruptcy documents and schedule a 341 hearing (meeting of creditors). At the hearing, any issues about the business and the assets of the business will be discussed. If non-exempt assets exist the trustee will arrange for their sale. If there are no lingering issues, objections, or problems with the bankruptcy, the court will order a discharge between four and six months after the petition was filed. All debts that can be discharged are discharged and the business effectively gets a “fresh start”.

If you believe a chapter 7 bankruptcy may be right for your business, contact an experienced Monmouth County bankruptcy attorney to discuss your options.


*We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.

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