Tips on How to Avoid Bankruptcy Proceedings thru Chapter 7 Bankruptcy
The idea of business bankruptcy has been invented in order to assist companies deal with extremely hazardous financial levels, said one of Florida’s best bankruptcy lawyers. Depending upon your accumulated debt s severity, filing bankruptcy may be the only logical solution to keeping your enterprise afloat. However, in some instances, filing bankruptcy is actually a strategic move rather than a last resort. Your bankruptcy attorney will explain to you the benefits and pitfalls of such an action. It may be the best course of action when it comes to facing financial challenges.
Many individuals are not entirely comfortable with the notion of having their property and assets evaluated in order to see what amount is owed to whom. Many individuals assume that the only situation that could warrant such evaluations is if the corporation has already filed for bankruptcy. This is simply not true. In fact, there are two major types of situations that could require such evaluations:
First, the court may order one or more corporations to cease trading or substantially cease operations. Such actions are often mandated by the passage of chapter 7. Chapter 7 provides that all creditors of a corporation are given the right to continue operating until the debts of the corporation are satisfied. In most cases, such creditors would refuse to accept payments from a company unless they were provided with a full and final resolution of the bankruptcy case. Because of this clause, most creditors may agree to accept a chapter 7 agreement in order to avoid bankruptcy proceedings.
Second, a company may choose to file a chapter 7 bankruptcy in which case all unsecured debt is also discharged. Once the obligations of a corporation are discharged, the owners of the company are typically able to resume their financial activities. However, in the event that the company does not settle its obligations as part of a debt settlement (which happens very rarely), some of its assets will be sold in order to satisfy its obligations to its creditors. As long as the proceeds are sufficient to satisfy its obligations, the proceeds can be dispersed to the creditors as part of a distribution agreement (or an otherwise legally binding contract).
While both of these methods can result in the liquidation of assets, only chapter 7 bankruptcy immunity allows a company to do so. Most businesses that are subject to such protection have been involved in a number of lawsuits. If a lawsuit related to the discharge of the company’s assets were to result in a judgment against the company, then the owners would likely not be able to recover their losses. Therefore, creditors would be better off accepting the distribution agreement than attempting to recover any additional funds from the company’s owners.
A number of businesses also elect to “assign” the entire debt of a business to a third party. Under this option, the business will enter into a financial transaction in which the debt is transferred to a debt buyer (or an entity that purchases the debt). In exchange for paying a premium to buy the debt, the buyer will assume responsibility for the debt. This financial transaction is known as a debt transaction and, if the company is not bankrupt, is a good strategy for restructuring debt.
Some small businesses choose to file personal bankruptcy to relieve themselves of certain debts that may arise. Personal bankruptcies must be filed with the state in which the company resides. There are some differences between personal bankruptcies and those filed by corporations. Business bankruptcies are filed in the small business state in which the company conducts business.
There are many reasons that companies choose to file bankruptcy. Many choose to do so in an effort to restructure debt and become more efficient at managing debt. While some small businesses file for bankruptcy as a last resort, it is not uncommon for companies to choose this method in light of their financial situation. Regardless of the reason, it is important that a company know all the facts before making any final decisions. You can also learn more about bankruptcy here.