Commercial bankruptcy, often called business bankruptcy, is a legal course of action a business can take when it does not have the assets to pay off its debts and stay in business. A business may choose or be forced to file for bankruptcy by its creditors. There are three primary types of commercial bankruptcy:
- Chapter 7 Bankruptcy: This type of bankruptcy is sometimes known as "straight bankruptcy." It involves a complete liquidation of assets and going out of business.
- Chapter 11 Bankruptcy: This type of bankruptcy involves a reorganization of assets and expenses in an attempt to pay off debts and return the company to profitability. During Chapter 11 bankruptcy proceedings, the day-to-day functions of the business carry on without change, while more significant transactions and expenditures are subject to the approval of the court. Creditors may provide input, but final confirmation of a chapter 11 reorganization plan is at the sole discretion of the court.
- Chapter 12 Bankruptcy: This type of bankruptcy is designed specifically for family farmers or fisherman.
Business bankruptcy proceedings are quite complex, and a business bankruptcy lawyer's knowledge and experience are invaluable. If you are considering filing for bankruptcy protection, contact an experienced commercial bankruptcy lawyer today.