Types of Business Bankruptcy

Business bankruptcy is normally undertaken when a business is unable to cater for its fiscal needs as well as pay its creditors’ debts. This is normally viewed as the last resort for majority of the businesses. When viable options such as pre-pack administration or debt consolidation are not possible, the business has to file for bankruptcy in order to deal with its problems. There are many types of business bankruptcy.

The first type is chapter 7. This type of bankruptcy is more common among the small businesses as compared to the bigger ones. This entails liquidating the assets belonging to the business and using the money to pay off its creditors. In most cases, the businesses which opt for this type of bankruptcy are normally closed. The whole procedure is usually supervised by an appointed trustee of the involved bankruptcy court.

The other type is chapter 9 which involves municipal councils with large debts to pay. Bankruptcy courts normally help the municipals to reorganize their debts as well as protect them from harassment from the creditors.

Chapter 11 is the most expensive of all the business bankruptcies. It is normally undertaken by the big companies as it allows them to retain their operations as well as assets. It also restructures debt payment methods and time frame. Chapter 13 is most suitable for business persons with steady sources of income as it allows them to retain non-exempt assets and restructures debt payment.