The Business Bankruptcy Filing Process

Even if a company is making a considerable amount of profit, it can still be deeply buried in debt from previous investments which have not significantly earned returns. Eventually, collections for these debts may outrun the profits being gained by the company. This kind of scenario has been spreading like wildfire ever since the recession descended upon the country. As a result, a lot of companies are barely floating on the proverbial surface, and some have even been forced to do mass layoffs, or shut down the business completely.

As a last resort, a company can apply for a business bankruptcy filing. The government recognizes parameters for different kinds of petitions, but all these bankruptcy processes need the services of bankruptcy lawyers. They are professionals who are trained in analyzing case studies and recognizing the needs of the struggling company, and helping make proposals and workout agreements between the corporation and the creditors. Bankruptcy lawyers are expected to be well-versed on the bankruptcy code of the government, in order to protect their clients from the collections of creditors and other parties. They are also supposed to help the company with the process of the business bankruptcy filing.

Procedure for Business Bankruptcy Filing

• Once the company has decided to file for bankruptcy, it should contact its bankruptcy lawyers in order for the paperwork to be processed. There are several types or “chapters” of bankruptcy that can be acquired for business bankruptcy filing: Chapter 7 (liquidation), Chapter 11 (reorganization of debts), or Chapter 15 (a special clause for international debts).
• The bankruptcy judge issues an automatic stay for the company. Under this stay, no creditor or other party is authorized to collect payments from the petitioning business. The company’s assets cannot be seized as lien or as payment by creditors while the stay is on issue.
• The company will testify to the court about the state of the company, the finances, and other pertinent information. The bankruptcy lawyers, along with the creditors, will also be present during the testimony.
• The company may present a plan for reorganization or restructuring the debt. The government may approve it, or accept proposals from the creditors. The government finalizes a proposal which all parties will vote upon.
• Once a reorganization or liquidation proposal gets approved, the court automatically cancels all debts and collections that the company holds. The tenets of the proposal will be put into place, and the company and the creditors are expected to comply with the agreed standards and schedules. The bankruptcy lawyers will continue to monitor the company and ensure that the bankruptcy upheaval process is accomplished as fast and as efficiently as possible.