While no business leader wants to think of filing for bankruptcy, there are situations when it becomes inevitable. Truthfully, filing for bankruptcy is a long process, one that can take months. However, if the professionals handling the filing know what they’re doing, then filing for bankruptcy should not be all that difficult. Experienced business lawyers are adept at helping businesses obtain bankruptcy protection if the company needs it.
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Bankruptcy is in place to help people start over when they experience a financial collapse. Through it, the court will check assets and liabilities of businesses or individuals who are unable to pay their bills or settle their debts and will determine whether or not the obligations should be paid.
The first step in filing for bankruptcy is to organize a list of debts, income, assets, and expenses – in short, a broad picture of the company’s financial situation.
Next, the company should hire a business lawyer (if it hasn’t yet) with experience in handling bankruptcy filings. An experienced attorney will be able to further explain the type of bankruptcy best suited for the company. Generally, there are two types of bankruptcy available for businesses: Chapter 7, where the company’s assets are liquidated to pay its creditors, and Chapter 11, where debt is reorganized and more time is given to the company to pay its creditors.
Once a type of bankruptcy is selected, the company should provide its attorney with the proper financial documents that include a list of creditors. The following steps depend on the type of bankruptcy the company has opted for.
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| Image source: Pixabay.com |
When the bankruptcy discharge arrives, the company will either cease its operations (if a Chapter 7 petition was chosen) or start paying its creditors via the reorganization plan brought about by Chapter 11.
David Baer is the COO and General Counsel for O’Shaughnessy Holding Company. Learn more about him and business law by checking out this blog.
