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Options for Corporate Bankruptcy: Choosing Between Chapter 11 Bankruptcy and Chapter 7 Bankruptcy

Article by Dason Jocko

When your business is in serious financial trouble, it may be time to consider filing for bankruptcy. If you’re uncertain whether to file for Chapter 7 or Chapter 11 bankruptcy, read on to learn about your corporate bankruptcy options.

If your business is struggling to keep ahead of mounting bills, it may be time to consider filing for bankruptcy. More and more companies are succumbing to today’s depressed financial situation and are having to face bankruptcy. But before filing a bankruptcy, it’s important to understand that the type of business bankruptcy you choose can have a serious impact on the final outcome. Learning more about Chapter 11 and Chapter 7 bankruptcy filings can help you determine which is the right solution for your company’s financial woes.

Filing Chapter 7 Bankruptcy

Chapter 7 bankruptcy is also known as bankruptcy liquidation. In simple terms, this type of corporate bankruptcy means the end of your business. Your company will be dissolved and its assets will be sold off to satisfy the business’s debts. A viable solution for eliminating debts, filing Chapter 7 bankruptcy is usually reserved for companies in the most dire financial straights or small, sole proprietorship businesses.

Filing Chapter 11 Bankruptcy

Chapter 11 bankruptcy is also known as bankruptcy reorganization. Unlike Chapter 7 bankruptcy, Chapter 11 bankruptcy does not dissolve the company. Instead, Chapter 11 bankruptcy filing focuses on addressing the organizational problems that led to insolvency as well as satisfying the company’s debtors. Some assets may be sold off to pay creditors, but other typical changes involve streamlining organization and restructuring management to return the company to profitability. Filing for Chapter 11 bankruptcy is usually the route selected by large corporations.

If your company is in financial trouble, bankruptcy of one sort or the other may seem like the only option, but you may want to consider bankruptcy alternatives like workouts and turnarounds. Your bankruptcy attorney can help ensure you’ve evaluated every option before filing for corporate bankruptcy, so be sure to consult an experienced lawyer for expert advice about your specific situation.

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