If your business is having trouble paying bills and making a profit, you may be considering bankruptcy in Rockville, Maryland.
You may have heard of Chapter 7 and Chapter 11 bankruptcy but do not understand how these options differ. The differences are important because they can determine the future of your business.
Chapter 7 bankruptcy means liquidating your business
You may choose Chapter 7 bankruptcy if you believe there is no realistic hope of continuing to operate your business. In Chapter 7 bankruptcy, the court orders the sale of the assets of your business to satisfy your debts as far as possible. The court typically declares your remaining debts discharged without further payment.
While this form of bankruptcy discharges your debts, it leaves you without a business. Depending on the form of your business and personal agreements you may have signed in the past, you may also have to part with personal property.
Chapter 11 bankruptcy may mean a path forward for your business
If you believe that your business could be profitable again in the future, provided you could get some relief from your debts, Chapter 11 bankruptcy may be the answer. In Chapter 11 bankruptcy, you and your attorney work out a plan with the court for a repayment schedule. Your creditors may also petition the court and force you into bankruptcy if you are not current on your obligations.
Either way, the court may order a reduction of your debts, an extension of repayment terms, or other ways to provide relief from your debts. If the court is not satisfied that you can become profitable again, you may find yourself in Chapter 7 bankruptcy whether you want to be or not. Also, as with Chapter 7, protecting your personal assets in a Chapter 11 bankruptcy may require careful work.
Sometimes bankruptcy can be the only option for a business. Chapter 7 and Chapter 11 both offer ways to deal with otherwise unmanageable debt.