How to File for Bankruptcy for Your Business

You'll probably need a lawyer to file for bankruptcy, but here's how to get started.

Instructions

Difficulty: Challenging

Things You’ll Need:

• Financial Statements
• Financial Calculator
• Attorney
• File Folders

1. Understand that there's more than one kind of bankruptcy. A Chapter 7 filing involves total liquidation of assets and dissolution of your business. Chapters 11 and 13 allow for protection from creditors and allow you to repay debts over a period of three to five years. Chapter 13 can be used by sole proprietorships and partnerships with secured debts of less than $807,750 and unsecured debts of less than $269,250. Family farmers can file for protection under Chapter 12.
2. Consult a lawyer who specializes in bankruptcy to determine if your company should file for bankruptcy and for what kind.
3. Give the lawyer complete information regarding your company's finances, income, assets and debts so that he or she may file correctly filled forms with the bankruptcy court.
4. Understand that your company will almost immediately be granted protection from creditors and that the court will notify all listed creditors of your bankruptcy filing and of the upcoming meeting with creditors.
5. Expect a "meeting of creditors" about a month after filing Chapter 7, at which point you're expected to surrender nonexempt assets to a court-appointed trustee. This trustee will then sell your assets and distribute the proceeds to your creditors.
6. Realize that you must submit a plan of repayment or reorganization for your business if you've filed Chapter 11 or 13.
7. Understand that this plan must show that creditors would gain more from reorganization than from liquidation. Know that your creditors are allowed to vote on the plan.
8. Know that you'll be released from debt in a matter of a few months if you've filed Chapter 7.

Tips & Warnings

• Bankruptcy forms can be downloaded from the Web. See Related Sites for further information.
• Filing for bankruptcy does not protect you from all debts. Expect to still be liable for taxes, legal penalties and certain other debts. Check with your attorney before you file for more information on this.
• In a Chapter 11 reorganization, the trustee has the right to take away control of your business from you, though this is unusual.