An economic crash down in your company may bring loads of anxiety. Bankruptcy is an interesting tool that helps you overcome debts in a stipulated time when managed carefully by a diligent financial team and legal associates such as Orlando bankruptcy attorney Walter Benenati.
Here is a quick guide to filing bankruptcy cases.
Know the term
When the companies are in no position to return their debts and wish to exist with their business, filing bankruptcy can be said to be an intelligent move.
It protects you from any further litigation. The automatic stay by the federal court safeguards the debtors from the individual collection by the creditors.
Know the classes
The different types of bankruptcy enable distinct recovery plans. They are listed below:
1. Chapter 7 bankruptcy: In this class, all the assets of the business are liquidated to pay off the creditors. It is mostly utilized to get away with unsecured debts.
The business is shut off, and the court appoints a trustee that takes over for the time until all creditors are repaid off their disputed amounts. Such cases of bankruptcy can be undertaken once every 8 years.
The means test decides eligibility where your average income of a month is valued against a median household income. If it is below the median earnings, you qualify and proceed for a legal filing. Otherwise, it is mandatory to repay the creditors at all costs.
2. Chapter 13 bankruptcy: It is also termed as wage earner’s plan and offers reimbursement over liquidation. It shields assets and property from being sold off, and a repayment plan is set up to assure creditors to receive their debts within a maximum period of five years.
The corporation and partnership businesses are exempted from chapter 13 bankruptcy. Those institutions that have unsecured debt of around $400,000 and secured debt of $11,000 are eligible via means test analysis. A trustee takes hold of the business.
3. Chapter 11 bankruptcy: Also known as “debtor in possession” because the owner can still operate the business as usual. This is a reorganization bankruptcy in which the company can reassemble its assets and equities.
A reparation plan is designed and presented in the court and confirmed by all the creditors within the exclusivity period of 180 days from the day of filing a petition.
4. Miscellaneous: Other bankruptcy cases, such as chapter 9, are for financially hampered cities, chapter 11 is for family farms, and chapter 15 is for overseas trading authorities.
Know the process of filing a bankruptcy case
After taking a financial review, a petition is filed in the local court by the company voluntarily or under pressure by creditors. All documents of a company’s assets, equities, incomes, contracts, tax returns, and expenditure sheets, along with financial statements, are to be submitted in court.
The jurisdiction then examines the case and asks for a repayment plan. Confirmation is essential to proceed. Various legal steps such as automatic stay and voidable preferences are implemented to protect the rights of the debtor.
If the debtors satisfy the creditor with timely compensations, the bankruptcy case is discharged if everything goes as per the plan of action.