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
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.