Article Advise

submitted: Aug 25th 2008 | by: RobertBain | Total views: 1 | Word Count: 583 | |

Bankruptcy is a word that strikes fear for individuals let alone for a business. It means that the business is suffering financially. It doesn't always mean that the business will be closing its doors though. It could mean they are going to take some time to reorganize. The corporate credit for any business that has filed for bankruptcy though can be severely scarred. It is important to understand how it will be affected before you file.

It isn't an easy decision to file for bankruptcy though and that is something people need to realize. The law doesn't make it easy for a business either so you can't do so in an effort to keep all the money you make and to run. There are various types of bankruptcy that a person can apply for. Understanding the basics should turn you to someone with more experience. They can help you with all the details of the process.

Generally the category will be determined by the lawyer after a full assessment has been done. There are specific stipulations that have to be followed in order to file under a particular category. It also depends on how deep the financial problems run for the organization. Chapter 7 bankruptcy is the one that should be reserved only for the most serious cases.

Chapter 7 is the form that those businesses who no hope of recovery may need to file. This is generally for large businesses that have huge amounts of debt they need to get assistance with. Just because a company is bringing in large sums of income doesn't mean they are making money. Be prepared to provide detailed financial records though in order to get the courts to remove your unsecured debts.

Chapter 13 is often one that small businesses use as they don't have the high dollar amount of debt. This generally allows some of the debt to be forgiven. For the most part though it has to be repaid but in small payments that a person can make. Again, the specifics of it will depend on what the circumstances are. The business may or may not remain open with such bankruptcy being filed.

Chapter 11 is a common one as well for those companies who want a chance to get back on track. They can restructure what they have in place so they can continue the business. This could turn out to be profitable in the long run so many businesses give it a try instead of tossing in the towel. It can be hard to get credit though in such a situation as the bankruptcy will be there on the company credit report for at least 7 years.

The costs involved with filing for bankruptcy will vary. There are court mandated costs that have to be covered. There is also the cost of the lawyer. You want someone who knows what they are doing so it can be quite expensive. Make sure you discuss those fees up front so you understand what it is going to cost your business for the process.

It is wise for any type of business to avoid filing for bankruptcy if possible. Sometimes it is the best possible decision to make though based on the circumstances. The various options need to be discussed with professionals who can help you come to your decision. Should you decide bankruptcy is the way to go make sure you follow all of the regulations for it. The process isn't easy but one that can be accomplished if done correctly.

About the Author

Robert Bain is a seasoned business author. Read the ups and downs of small business credit, building small business credit, aged and shelf companies and many more topics.

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