Creating a Plan for Your Business Moving Forward
Despite our best efforts, the business may not succeed. Moreover, keeping a struggling business afloat will only make you incur more personal debt. In order to determine the ideal bankruptcy option for your business, you need to consider the plan you have for the business moving forward.
For instance, do you prefer closing the business for good, or are you searching for a way to still keep the business afloat while you rebuild and restructure?
Which Bankruptcy Option
is Right for Your Business?
Your business structure and plan for the business moving forward will help you determine the right bankruptcy chapter that best fits your unique situation and needs. Those bankruptcy options include the following:
Chapter 7 bankruptcy, often referred to as "liquidation" bankruptcy, helps individuals and businesses clear away most of their general unsecured debts so that they can secure the"fresh start" that they need. As a sole proprietor, you and your business will be treated as a single entity. Thus, filing for Chapter 7 bankruptcy using your name can help you discharge some of your unsecured debts.
Conversely, Chapter 7 bankruptcy isn't typically favorable for an LLC or partnership, since such business structures don't allow debt discharge. Filing for Chapter 7 bankruptcy will only increase the liabilities of members or co-owners.
Chapter 11 bankruptcy, often referred to as "reorganization" bankruptcy, allows business owners to reorganize the business affairs, operations, assets, and debts. In Chapter 11, the debtor is allowed to propose a payment plan to repay creditors while keeping the business afloat.
Chapter 11 bankruptcy is usually more suitable for partnerships and LLCs. However, filing for this bankruptcy option can be expensive, lengthy, and time-consuming. Additionally, the Illinois court or creditors need to approve the repayment plan before moving forward.
In the state of Illinois, filing for chapter 13 bankruptcy involves setting up a repayment plan to pay down your debt. Through Chapter 13, business owners are able to reorganize and repay all or some of their debts through a repayment plan spread across three to five years, and the business owners will be allowed to keep their assets. Also, the business owner can discharge a wider range of debts using Chapter 13.
Since Chapter 13 is considered a "wage earner's plan," it is only available to sole proprietors who file as individuals. This option ensures that there is no direct contact between the business owner and the creditors. The business owner is required to divert all disposable income into the repayment plan and report to a court-appointed trustee. The trustee then distributes all payments to any creditors.
Why You Should Work with Experienced Business Bankruptcy Attorneys in Chicago, Illinois
Business disruptions and volatile markets have resulted in debt and liability for many businesses across the nation. In such situations, bankruptcy can truly mean a fresh start and an opportunity to recover from devastating financial issues. If you’re considering filing for bankruptcy, a knowledgeable Illinois business bankruptcy attorney can offer you reliable guidance by helping you review all of your legal options.
At Robert J. Adams & Associates, our attorneys have devoted their careers to providing experienced legal counsel and representation to business owners throughout the bankruptcy filing process. As your legal counsel, our attorneys will evaluate your unique situation and determine the bankruptcy option that is right for you and your business. Our team will help you file your forms, represent you throughout any court proceedings, and offer you the experienced legal guidance you need to navigate all key decisions at every turn.