Paducah Business Bankruptcy Lawyer | Kentucky Bankruptcy Attorney

Paducah Business Bankruptcy Attorney

There are two options when seeking business bankruptcy protection. When a company is going out of business, they sometimes have Business Bankruptcycreditors that still have to be paid for their business loans. In those situations, the business might want to consider filing a Chapter 7 BankruptcyWhile Chapter 7 can help businesses looking to close, it does not help businesses who are having debt issues and want to stay open. In those situations, Chapter 11 Bankruptcy will be their best option. Many large businesses choose to file Chapter 11, but small businesses are able to file it as well.

Chapter 11 Bankruptcy: Restructuring

Chapter 11 bankruptcy allows the business to stay open and restructure their debts. During the restructuring period, the business will be under the supervision of the Court and is protected from creditors attempting to collect its debts. The Company gets to stay in control of its business. While the debtor is still operating the business, they are required to operate their business in a manner that is beneficial to the creditors owed money. The Company is given a period of time to come up with a restructuring plan that it thinks it can afford.

One benefit to filing a Chapter 11 is that unlike a Chapter 13 bankruptcy, there is no debt limit. Companies such as Delta Air Lines and K Mart have filed for Chapter 11 bankruptcy and successfully restructured its debts. This opens the door for many businesses who would be unable to reorganize their debt in Chapter 13 due to the amount of debts they owe. It doesn’t matter how many creditors the business has, it is eligible to file a Chapter 11 and restructure its debts.

If it is a large case with a large number of creditors, a creditors committee is appointed to represent the unsecured creditors. This committee’s job is to negotiate the best possible payment plan for the creditors.

The complexity and length of the payment plan depend on the specifics of the business filing Chapter 11. Most small businesses have straightforward plans, while larger businesses can have much more complex plans that have many moving parts. The plan could include layoffs, stock offers, renegotiating union contracts or closing certain business locations.

Once the company comes up with its reorganization plan, the creditors get to vote whether to accept it. If the creditors vote in favor of the plan, it would then be confirmed by the Court and all of its debts would be rewritten.

Chapter 11 is a complex process which if not done correctly, can be a death sentence for the business. Very few lawyers have experience in representing debtors in Chapter 11 bankruptcy cases. Always consult an experienced attorney when discussing Chapter 11 issues. Contact our experienced Paducah business bankruptcy attorney for a consultation.

Chapter 7 Bankruptcy: Liquidation

The majority of businesses are incorporated in some capacity, whether as a corporation or LLC. As the company is its own entity, it must file its own bankruptcy. These companies are formed for the purposes of shielding the owners from having their personal assets seized if they fail to pay their business debt. However, the business might not be able to wrap up without paying off the creditors to the best of its abilities. In those situations, the business will file Chapter 7.

Unlike individuals, businesses do not receive discharges when they file bankruptcy. Instead, Chapter 7 is designed to assist the business in liquidating their assets and paying off any debts they owe to existing creditors so their business can properly close. In a business bankruptcy, all remaining assets of the business are sold off to pay the remaining debts. That is a big difference from when an individual files Chapter 7 as the individual has exemptions they can use to shield their assets from creditors.

Businesses are not offered exemptions as the court requires all assets of the business to be sold off before the business can properly close. Business debts personally guaranteed by its owners are not shielded by the owner’s company, as they entered into the debt individually and not through the business. Many business owners never even realized that they personally guaranteed payment of business debts.

A business chooses to file bankruptcy so they can close out their entity in a mannerly fashion without having to worry about creditors coming back in the future. The bankruptcy’s biggest benefit is that it allows the business to be closed in a calm and orderly manner. Upon filing the bankruptcy, the court appoints a trustee, whose job it is to sell off the assets of the business and disperse the funds from the sale to the creditors of the business. This process makes it much easier for the owners of the business than if they had to settle these debts with the creditors on their own.

The largest benefit of business bankruptcy is that upon liquidation, the business will no longer be liable for any of its debts. This remains true even if the creditors are not paid in full for the debts that they were owed. All obligations of the business will have been paid to the fullest extent possible by the trustee and the business will no longer be liable for the debt.

Businesses will need to hire an attorney for their bankruptcy. Always consult a Louisville Kentucky business bankruptcy lawyer who has specific experience in handling business bankruptcy cases.

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