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3 types of bankruptcy to help businesses move forward

On Behalf of | Feb 27, 2023 | BANKRUPTCY LAW - Business & Commercial Bankruptcy

Business bankruptcy allows a business to either reorganize its debts or liquidate its assets to pay off creditors. Idaho businesses can use three types of business bankruptcy, each with unique features and requirements.

Chapter 7 bankruptcy

Chapter 7 bankruptcy is also known as liquidation bankruptcy. In this type of bankruptcy, the business ceases its operations and all its assets are sold to pay off creditors. A trustee is appointed to manage the sale of assets, and any remaining debts are discharged. Business owners often use this type of bankruptcy when they have no hope of recovering and must close their doors permanently.

Chapter 11 bankruptcy

Chapter 11 bankruptcy is also known as reorganization bankruptcy. This type of bankruptcy allows a business to restructure its debts while continuing to operate. The business owner remains in control while developing a repayment plan to repay creditors over time. This type of bankruptcy is often used by businesses that can recover but need time to reorganize their finances.

Chapter 13 bankruptcy

Chapter 13 bankruptcy is a form of reorganization commercial bankruptcy that is only available to sole proprietors or individuals with regular income. Under Chapter 13 bankruptcy, the business owner creates a repayment plan to pay off debts over three or five years. This type of bankruptcy allows the business owner to keep their assets and continue operating their business while repaying their debts.

The best option for your business

Each type of bankruptcy has its own unique features and requirements, and it is important to determine which type of bankruptcy is appropriate for your business. By using bankruptcy as a tool to restructure debt or liquidate assets, businesses can often find a way to move forward and rebuild.