Businesses need sufficient finances to survive. They can face several financial challenges because of external, internal, or a combination of both factors. If your business is unable to continue operations because of monetary difficulties, you can file for business bankruptcy.
Chapter 7 Business Bankruptcy or liquidation bankruptcy is one of the six types of bankruptcy defined by The United States Bankruptcy. Filing for bankruptcy can be complex without the right legal guidance. Consult an experienced bankruptcy lawyer to help you throughout the process and restart your life.
What happens after you file for a Chapter 7 business bankruptcy?
Once the business files for bankruptcy, all its operations stop. The court creates a bankruptcy estate and appoints a trustee. The trustee is given the authority to examine the business’ finances and sell assets for cash. Any money it makes after filing for bankruptcy is turned over to the trustee. The proceeds collected from the sale are distributed to the creditors once the legal and administrative expenses are paid. If necessary, the court also authorizes the trustee to operate the business temporarily.
Are employees paid after the business bankruptcy?
After liquidating assets, the employees are paid some wages during the bankruptcy process if they are to be terminated. Claims for salaries, wages, and commissions are near the top of the list of payment priorities. Employees with retirement plans or pensions and wage employees are given higher priority during payments. However, new employees may be denied payment if there are insufficient funds. If the business owner starts a new business after the bankruptcy is complete, they have more compensation options.
How are creditors paid after the business bankruptcy?
All creditors are informed about the bankruptcy, and they are required to file a claim in case there are funds remaining to repay them. Creditor claims are classified in to secured and unsecured claims. Creditors that made a claim secured by a lien on some of the business’ property are returned their collateral. If they cannot receive the full payment, they are grouped with the other unsecured creditors. Business owners are only liable to pay them if they take personal responsibility for the business debts.
A bankruptcy lawyer can help you navigate the complicated bankruptcy laws and complete the bankruptcy process for your business. They provide you with comprehensive legal advice to ensure that you take the proper steps. While filing for bankruptcy for your business may be distressing, a lawyer can simplify the process and enable you to build another business in the future.