How To File for Bankruptcy For Business Owner

Here is a quick guide to how to file for bankruptcy if you own a business.

There are many kinds of bankruptcy. A Chapter 7 filing involves the total liquidation of assets and dissolution of your business. Chapters 11 bankruptcy and Chapter 13 bankruptcy allow for protection from creditors and allow you to repay debts over a period of three to five years. Chapter 13 bankruptcy can be used by sole proprietorships and partnerships with secured debts of less than $807,750 and unsecured debts of less than $269,250. Family farmers can also file for protection under Chapter 12 bankruptcy.

How To File for Bankruptcy:
-  Consult a bankruptcy lawyer to determine if your company should file for bankruptcy and for what kind of bankruptcy.

-  Give the bankruptcy lawyer the complete information regarding your company's finances, income, assets and debts so that he or she may file correctly filled the relevant forms with the bankruptcy court.

-  Understand that your company will almost immediately be granted protection from creditors and that the court will notify all listed creditors of your bankruptcy filing and of the upcoming meeting with creditors.

-  Expect a "meeting of creditors" about a month after filing Chapter 7 bankruptcy, at which point you're expected to surrender nonexempt assets to a court-appointed trustee. This trustee will then sell your assets and distribute the proceeds to all your creditors.

-  Realize that you must submit a plan of repayment or reorganization for your business if you've chosen to file Chapter 11 bankruptcy or Chapter 13 bankruptcy.

-  Understand that this plan must show that creditors would gain more from reorganization than from liquidation. Know that your creditors are allowed to vote on the plan.

-  Know that you'll be released from debt in a matter of a few months if you've filed Chapter 7 bankruptcy.