How to File for Commercial Bankruptcy

When your business profits are falling and your debt is piling up, you may want to file for commercial bankruptcy to settle your loans or win time for restructuring your company. A careful review of your options and a discussion with business advisers can help you make the best decision for your case, so you can begin the legal paperwork.

Instructions

Difficulty: Moderate

Things You’ll Need:

• Debt and income documentation

1. Find a lawyer to help you through the bankruptcy process. She should have past experience working for both creditors and debtors on these cases, but she must not have any business connections that would cause a conflict of interest between you and your creditors.
2. Meet with your lawyer, financial advisers and board of trustees, and decide whether the business is salvageable. If a reorganization of your business debt and internal changes at the company allow you to pay your creditors on time, consider filing for Chapter 11. Apply for Chapter 7 bankruptcy if your financial situation is in shambles, but realize that doing so will probably mean the end of the commercial venture.
3. File the appropriate bankruptcy petition with the court. Remember to include documentation that lists all of your creditors, the amounts due to each and the net income of your business.
4. Plan for the possibility that you will not be completely discharged from your loans if you're filing Chapter 7. Your lawyers will look at the net worth of both your secured and unsecured debts and compare them to the value of your commercial assets. If your lawyers see the possibility of the courts going after your personal affairs to cover your small-business debt, be sure to have them prepare a legal defense to protect your assets.
5. Work on a debt-management plan if you've filed Chapter 11 bankruptcy. Illustrate how you will change your business and how much you will be able to pay to each of your creditors. Remember that these plans must pay off loans in roughly 5 years, and they must be presented within 120 days after you file for bankruptcy.

Tips & Warnings

• In Chapter 7 bankruptcy, you're required to attend a court meeting and answer any questions from your creditors before the liquidation process can begin. Answer to the best of your ability and in good faith.
• Different states have small differences in the filing process and requirements, so your lawyer should be familiar with the states in which you are going to file.