Business Bankruptcy

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Bankruptcy is not only filed by individuals but even business entities file bankruptcy cases. When the debt becomes high than what the business organizations can pay or when the creditors’ claim exceeds than their capability to pay the debt, business organizations file for bankruptcy case so that they can reduce their debt to a certain extent. With the help of the bankruptcy petition, they can lessen the amount of the debt to be paid and the amount which needs to be paid then after, they get the option to pay their creditors in installments to the best of their capability along with maintaining their daily commercial business. A business organization can go for two types of bankruptcies. They can either go for reorganization or liquidation. In reorganization bankruptcy, they have the opportunity to reorganize their debts and assets in possession to cut down a part of their debt and pay the remaining either in installments or in lump sum amount which ever is best suited to them according to their capability. While in liquidation, the entire of their equity of assets is sold to transfer it into liquid so as to settle the whole credit of their creditors. Chapter 7, chapter 11 and chapter 13 bankruptcies are the most commonly used types of bankruptcies by the business organizations. Chapter 7 is mainly used by individuals, but when business organizations want to opt for liquidation bankruptcy where all there property will be sold to settle the debts, and then they file for chapter 7 bankruptcy. While for chapter 13, they have the opportunity to pay off the debt over a period of three to five year keeping along their property and business intact. On the other hand, chapter 11 bankruptcy is specially designed for the corporate world and is even known as the corporate bankruptcy. This bankruptcy is more commonly used by the business organizations. The case filed may be either voluntary or involuntary. When the creditor files a case against his debtor it is known as involuntary petition while the regular one being filed by the debtor is known as the voluntary petition. This bankruptcy case begins when the debtor or the business organization files a case of bankruptcy with the bankruptcy court which serves the area where the business organization is based. The filing needs to be done with the all the asset liability schedules, unexpired leases and executable contracts, income expenditure schedules, and a monetary affair statement. Fees of $1000 for case filing and $39 for various administrative fees are charged by the court which is paid to the clerk. The fees can also be paid in installments with the permission from the court. Payment of fees is important, as a failure in fees payment may lead to the dismissal of the case.

Business bankruptcy is not as easy as it sounds. A fraud case if caught may lead to jurisdiction under the state laws as a fraud business bankruptcy case is considered to be a crime.