Your company has fallen on hard times. At first, things were booming, but lately, you haven’t been able to push your products at all. At this rate, you’re not going to be able to pay to keep the lights on in your building this month.

You don’t have a choice. You’re going to have to file for business bankruptcy.

We know that it sounds like the end of the world, but it’s not. Bankruptcy is an expensive and traumatic experience, but it doesn’t mean you have to close your doors for good.

There may come a time when you’re able to open shop again. If you don’t believe us, read further as we take you through the steps of the bankruptcy process.

Learn What Type of Bankruptcy You Want to File

There are several types of bankruptcy that you can file. So, the first step is deciding which one you want to go with.

Keep in mind that some of them are out of your reach, depending on what type of business you’re running. Some of them will allow you to continue to keep your business open while you tackle your debts.

Chapter  7

A chapter 7 bankruptcy is an option that’s available for any small business owner.

You’ll go this route if you don’t have the funds to keep operating. Your company will close, and all your assets will become liquidized.

To qualify for a chapter 7, you’ll have to prove that your business isn’t bringing in enough money for you to keep your lights on.

After your assets are liquidized, trustees will spread them across the creditors to whom you owe money to. You’ll then receive a discharge. It’s a guarantee that your debts have been settled, and creditors can’t come after your personal assets.

If you’re part of a partnership, you won’t be able to receive the discharge, so your personal belongings will remain in danger.

Chapter 11

If your business isn’t completely out of the woods yet, you can file a chapter 11. With court approval, your management team will still be in control of the company and be able to make all the big decisions.

You’ll still be in charge of paying back all your debts, so to qualify for chapter 11, you’ll have to be bringing in some kind of revenue.

You’ll negotiate with your creditors to create a new repayment agreement. For example, let’s say that right now, you only have 10 years to pay back your loan. The creditors might be willing to expand it out to 20 if it means that they get their money.

Chapter 13

While any small business owner can file a chapter 13, it’s more popular with sole proprietors. This being said, you’ll have to file your petition under your name instead of your company’s name.

After you finish your paperwork, your debt will go into trustee review. In the meantime, you’ll still be able to operate your business, but you must submit a plan for reorganization.

When it’s all said and done, some of your outstanding debt might be discharged. You’ll only get three to five years to pay back your final balance. That’s why it’s a better option for companies that aren’t too in debt.

File a Petition

Now that you’ve decided what kind of bankruptcy you’re going to file, it’s time to start the process by filing a petition.

You’ll have to submit your petition to the correct jurisdiction. There are 94 of them. A quick Google search will tell you which jurisdiction is in charge of bankruptcy cases in your area.

Complete the Necessary Forms

After your petition makes it into the hands of the court, you’ll be required to do, well, a lot more paperwork. The forms you have to fill out and the information you’ll need to submit depend on what type of bankruptcy you decided to go with.

For example, let’s say that you filed a chapter 11 or 13. On top of filling out your forms, you’ll also have to supply the court with a reorganization plan. They need to know how you plan to bounce back and tackle your debts.

Get Your Reorganization Approved

When you submit a reorganization plan, the court will meet with your creditors to go over it. If your plan gets approved, you’ll be in the clear to continue running your business.

You’ll need to make regular financial reports to the court to make sure you’re following along with the plan you put in place.

Of course, if you file a chapter 7, there will be no need to submit a plan. Again, trustees will liquefy your assets and spread them around. Your debts will be tackled without any further work from you, but your business will be no more.

How Long Does the Process Take?

It can take a while for the entire business bankruptcy process to go through. If you’re filing a chapter 7 or 13, you’ll only have to wait about 6 months. Filing a chapter 11 will take a year.

If there comes a time when you want to annul your bankruptcy, you can go to https://www.ndandp.co.uk/insolvency-claims/.

Learning the Ins and Outs of Business Bankruptcy

Business bankruptcy doesn’t have to be a bad thing. If you file a chapter 11 or 13, you’ll still be able to run your business while tackling your debts.

If you file a chapter 7, your business will be gone, but that doesn’t mean you can’t rebuild one day.

For more tips that will help you get your company finances in order, visit the Business section of our blog.