How to Declare Business Bankruptcy
Even great companies may face a period of significant financial distress. Bankruptcy is a legal option that business owners can use to help their company find the best path forward. In some cases, that means winding down operations and liquidating the business. In other cases, that means restructuring debts to get back on stable financial footing.
You may be wondering: What does a company need to do to declare bankruptcy? There are many different rules, regulations, and procedures that must be satisfied. In this article, our business bankruptcy attorneys explain the steps you need to take to declare business bankruptcy in the United States.
Step #1: Know Your Options and Know Your Objectives
Before a business owner even thinks about putting in the legal paperwork to declare bankruptcy, it is imperative that you carefully assess your financial circumstances, your options, and your long-term objectives. In general, businesses have three basic options to get out of overly burdensome debt:
Alternative Debt Relief Solutions: Bankruptcy is not the right option for every financially distressed business. In some cases, a non-bankruptcy debt relief settlement may be more effective. A business bankruptcy lawyer can help you consider and evaluate your alternatives.
Chapter 7 Bankruptcy: For businesses, Chapter 7 bankruptcy is a liquidation bankruptcy. Essentially, it is a tool the business owners can use to wind down their company while resolving all outstanding debts and financial obligations.
Chapter 11 Bankruptcy: Declaring bankruptcy is not always the end for businesses. Quite the contrary, Chapter 11 bankruptcy allows companies to restructure their debt payments in a sustainable manner. Notably, the recent Small Business Reorganization Act (SBRA) has made it easier for many small and mid-sized businesses to use the Chapter 11 process.
Step #2: Gather and Organize Financial Documents and Record
Declaring bankruptcy protection is a paperwork-intensive process. As a business owner, you are going to need comprehensive financial records, documentation, and information before you can proceed. One of the best things you can do is to carefully organize all of the information that you have in your possession. A business bankruptcy lawyer can help you track down all the documents you need.
Step #3: File a Bankruptcy Petition
Once you have clarified the long-term objectives of your business and gathered/organized all relevant financial information, it is time to prepare the bankruptcy petition. Both Chapter 7 bankruptcy petitions and Chapter 11 bankruptcy petitions are complicated. Businesses should work with an experienced bankruptcy attorney who can help them prepare a strong, persuasive petition that satisfies all legal requirements. Even relatively modest mistakes could cause serious problems for your business.
Contact Our Business Bankruptcy Lawyers for Immediate Help
At Pierce / McCoy, our business bankruptcy attorneys are experienced, effective advocates for clients. We will help you find the best available solution. If you have any questions about declaring bankruptcy, our attorneys are more than happy to help. Contact our firm today for a confidential initial consultation. We offer business bankruptcy services to clients in New York, Texas, and Virginia.