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Chapter 7 Bankruptcy can Help as you Close your Business

On Behalf of | May 21, 2021 | Bankruptcy

A drop in consumer spending, difficulty finding staffing or even problems with your supply chain may have affected your once-profitable business. It may only take a few weeks for a company to go from generating revenue to deeply in the red and unable to pay their bills. When a company’s expenses exceed its revenue, insolvency is often close at hand.

Obligations might include payments on financed equipment, your rent and your labor expenses. When sales aren’t high enough, maybe you won’t be able to pay all of those costs. At first, you may be able to qualify for short-term financing to cover expenses, but when your revenue doesn’t bounce back, you may eventually need to make a difficult decision.

Choosing to dissolve or close your business can be the best option if there isn’t a near-future solution for your current economic woes. Chapter 7 business bankruptcy can help you settle the financial obligations of the business before you move on with your life.

Chapter 7 Bankruptcy Involves Property Liquidation

When businesses file for bankruptcy, they often focus on restructuring so that they can preserve their assets, maintain relationships with creditors and keep most of their staff. However, when you know that the business model doesn’t work anymore or your particular company is too far underwater to make recovery feasible, getting rid of some of the company’s assets and using the resources to repay creditors can be an excellent solution.

When you file Chapter 7 bankruptcy, you submit information about your company’s resources to the courts. You can distribute proceeds among your creditors according to the priority of the debts involved. After that, the balance of unsecured debt that remains will be eligible for a discharge in most cases.

Business Bankruptcy has More Moving Parts Than Personal Bankruptcy

Chapter 7 bankruptcy may be the most streamlined form of bankruptcy, but that doesn’t mean it’s an easy process when you have a company. Business bankruptcy can be a much more involved process than personal filings. You will likely need help with the process, especially if you hope to protect yourself from financial obligations after you dissolve the business.