How to File a Business Bankruptcy

A business bankruptcy, also known as Chapter 11, is not like other forms of bankruptcy. Business bankruptcy does not require a liquidation of assets to pay off creditors, as is done in Chapter 7 bankruptcy. With business bankruptcy, a debtor business maintains ownership of the company and continues to operate it after reorganizing and creating a repayment plan with creditors. Most businesses in severe financial trouble file this form of bankruptcy, though Chapter 7 and Chapter 13 are also filed by some businesses. Here are guidelines.

Difficulty: Moderate

Instructions

1. Determine if Chapter 11 is right for your business. The reorganization Chapter 11 provides is not a silver bullet for all dying businesses. In order for Chapter 11 to work, you have to be able to generate future business and profits to pay off your creditors.

2. Hire a bankruptcy attorney who has a lot of positive experience working with businesses. Your attorney will help you determine if bankruptcy is right for your company and handle the paperwork required for filing.

3. Consolidate all of your business's financial records to give to your bankruptcy attorney and the court. You'll need profit statements, records of outstanding credit as well as future forecasts, if available.

4. Create a repayment plan. You will have to submit a repayment plan to pay back your debts within 120 days of the date you file. If you don't submit a repayment plan in that deadline, your creditors may submit their own plan to be monitored by a court-appointed trustee.

5. Be faithful to the repayment plan approved by the court and agreed upon by the creditors. If you become delinquent, you could lose control of the operations of your company, or your Chapter 11 bankruptcy could be converted to a Chapter 7 bankruptcy and your assets could be liquidated.

Tips & Warnings

• Once you have begun bankruptcy proceedings, your creditors are barred from contacting you to solicit payment on past debts.
• Check attorney references. Just because an attorney advertises on TV or over the radio doesn't mean that attorney is skilled or qualified. A good bankruptcy attorney can save you a lot of time and money.
• Disclose all assets of your business when you file. Failure to do so could result in charges of fraud, and a trustee could be appointed to take over the operations of the business as proceedings continue.
• Don't handle your business bankruptcy filing yourself. This is a more complex form of bankruptcy and requires the expertise of an experienced attorney.