Business Chapter 7 & 11 Bankruptcy Attorneys in Northwest Indiana
If you own a small business and are facing financial hardship, the Small Business Reorganization Act does a lot to help small businesses. We are here to assist your Northwest Indiana business get through your financial difficulties.
Chapter 7
When a business cannot service its debt or pay its creditors, the company or its creditors can file with a federal bankruptcy court for protection under either Chapter 7 or Chapter 11.
Both individuals and businesses are eligible to file for Chapter 7 bankruptcy protection. A business Chapter 7 will liquidate the company's assets to pay off its creditors.
Chapter 11
A Chapter 11 bankruptcy case is usually a proceeding for reorganization of a debtor engaged in a business. Under some circumstances, it is available to consumers as well. Under Chapter 11, the Debtor is typically a business seeking to reorganize its debts in a way as to enable the struggling company to continue operating into the future. The business may be a corporation, sole proprietorship, or partnership. A corporation exists separate and apart from its owners, the stockholders. The Chapter 11 bankruptcy case of a corporation (corporation as Debtor) does not put the stockholders' personal assets at risk other than the value of their investment in the company's stock. On the other hand, a sole proprietorship (owner as Debtor) does not have an identity separate and distinct from its owner(s). A bankruptcy case involving a sole proprietorship includes both the business and personal assets of the owners-debtors.
Chapter 11 affords the Debtor in possession of several mechanisms to restructure its business. A debtor in possession can acquire financing and loans on favorable terms by giving new lenders priority on the business's earnings. The court may also permit the Debtor to reject and cancel contracts. Debtors are also protected from other litigation against the company through the imposition of an automatic stay. While the automatic stay is in place, creditors stay from any collection attempts or activities against the Debtor, and most litigation against the Debtor is stayed (put on hold) until the bankruptcy court can resolve it.