Filing For Business Bankruptcy Can Be A Daunting Task

Business bankruptcy can present itself as an easy way out for businesses that are enormously weighed down by financial obligations, but business bankruptcy isn't as simple as it might appear. You have got to assess whether your business has a good future or not. If you think that your company does not have any future, then you may choose to file for bankruptcy under Chapter 7, which will assist you in liquidating the company. However, if you can see some light at the tunnel's end, you may prefer to file for business bankruptcy under Chapter 11, which will help reorganize the company. Prior to filing a bankruptcy, consider and prepare for the following:

1. You need to submit your fiscal reports along with your business bankruptcy petition. Therefore, it is a good idea to keep tax records, financial statements, and record of agreements and contingent liabilities ready. The list of agreements should also include details of contracts that have been gotten into but not yet performed.

2. The legal counsel plays an important role in a Chapter 11 business bankruptcy and it's crucial to work with a reputed attorney who is specifically experienced in representing debtor-clients filing a petition for Chapter 11 business bankruptcy. Working with a lawyer who is an expert at representing creditors may not work. Working with an attorney who specializes in Chapter 7 petitions also may not be ideal. Hence, it is recommended that you choose a lawyer with care. Chapter 11 business bankruptcy is awfully specialized and consumes a lot of time and entails skillful negotiation with creditors. Only an expert and Chapter 11 savvy lawyer can certainly deal with such tasks.

3. Are you a farmer who’s suffering from debt problems? If your answer is yes, then it is highly recommended that you file for bankruptcy under Chapter 12. Do you earn a salary or a sole proprietor? If yes, consider Chapter 13 bankruptcy, which is more popularly known as wage earner’s bankruptcy. These bankruptcies are simpler and easier compared to a  Chapter 11.

4. You must always be truthful with your lawyer. Disclose all material and immaterial money affairs and situations which pulled you into the debt in the first place. These details will assist your case. Reveal your priority debts like support for child, spousal support, employee benefits, taxes due, etc. Talk about your creditors as well and categorize them into semi-secured, fully secured, unsecured, financial obligations from family members or subsidiary companies, etc.

5. If you’ve filed a petition for bankruptcy based on Chapter 11, the bankruptcy court will require you to operate as the case trustee (barring a variety of fraud cases) and function as a debtor in possession. A panel of creditors will be appointed and you will be required to put forward a reorganization plan to the bankruptcy court. The panel of creditors will then vote on your reorganization plan and if it is accepted, the court will affirm it. Once the reorganization plan is agreed upon, you must accomplish it as per its stipulations. Even moderate deviations from the plan may be viewed as a breach of agreement, and if this happens, the bankruptcy proceeding can fail.

Filing a business bankruptcy may appear simple, but is more complicated than you could ever imagine. Get hold of a lawyer who is an authority in your kind of bankruptcy before making your first move. Best of luck.