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Different Types of Business Bankruptcies

Posted on September 17th, 2013

Business bankruptcies can have lasting effects not just on the owner, but on employees as well.

Business bankruptcies can happen to any business at any time, so it’s important to know the different

types of business bankruptcy and how to handle them. Being informed ahead of time will allow you to

be prepared should your business face financial trouble.

Every business is different, and as such, bankruptcy for businesses is also varied. Common business

bankruptcies include:


Liquidation or Chapter 7 Bankruptcy

This type of business bankruptcy is utilized by small businesses that lack a reasonable ability to pay its

debts. A trustee is named to sell all of the assets owned by the business and the proceeds are used to

pay any debts. After the liquidation of assets, any debts that remain unpaid are eliminated. Chapter 7

bankruptcy filings can cost anywhere from $2,000 to over $5,000, so it is often an option used by small

businesses because other filing options can be more costly.


Reorganization or Chapter 11 Bankruptcy

This bankruptcy filing is generally used by larger companies that do not want to liquidate all of their

assets but instead have devised a reasonable plan to reorganize their business. This can be more

costly—anywhere from $10,000 to over $50,000. This option is utilized by companies that feel the

business will recover after reorganization.


Repayment or Chapter 13 Bankruptcy

This option is usually used for personal claims, but for a sole proprietor, the owner files a repayment

plan with the bankruptcy court explaining how the debts will be repaid. This type of bankruptcy filing

generally costs from $3,500 to $10,000, depending upon the complexity of the business and the nature

of the debts.


Filing bankruptcy for your business can be a confusing and stressful time. Remember Skinner Law Firm is

here to be a resource during uncertain financial times.