Sometimes a business owner will experience financial difficulties and may want to consider bankruptcy protection. A bankruptcy filing can stop litigation or collection efforts on the part of the creditors and allow a the debtor to eliminate burdensome contracts – often times with fewer financial consequences. A bankruptcy will often reduce what is owed to creditors allowing a debtor to recover financially.
The typical bankruptcy case involves a chapter 7 liquidation, a chapter 13 reorganization, or a chapter 11 reorganization or liquidation.
In a Chapter 7 bankruptcy, a business ceases to operate and a trustee is appointed immediately upon the filing of the case. His or her duties are to liquidate assets and prosecute litigation for the benefit of creditors.
In a Chapter 13 bankruptcy, the individual debtor continues to operate with oversight provided by a trustee. The trustee’s roll is limited to reviewing the chapter 13 plan and making sure that the plan is followed.
In a Chapter 11 business bankruptcy, the debtor retains control of its assets and continues to operate its business until a plan is confirmed. Prior to plan approval, the debtor will decide which contracts it wants to assume or reject, all while operating the company and preparing a plan.
If you are a small business owner, bankruptcy protection may provide you with viable options so you can continue operating and allow you to reduce what you owe creditors in many circumstances. If you have questions or would like more information regarding bankruptcy protection, contact the Law Offices of Charles E. Covey for assistance today 309-674-8125.
