Save Your Business BY Filing Chapter 7 Bankruptcy – An Overview
When your business is in trouble you will do what ever it takes to save it. That being said, there are some options when it comes to financial instability and to financial issues regarding your business. Chapter 7 bankruptcy is an option that can help to save your business and get you back in the game.
What type of Business Can File For Chapter 7 Bankruptcy in the State of California?
It is helpful to first look at what chapter 7 bankruptcy is. Chapter 7 is often used by businesses that do not want to liquidate and that prefer instead to stay in business and restructure.
With a chapter 7 claim, they do offer the option to liquidate items that are non-essential to the business to help pay back the debt and to prevent the business from shutting down.
The business will then work to pay off what they can and write off the rest.
When it comes to filing for chapter 7, not all businesses are able to do so.
For the most part, the option to file a chapter 7 bankruptcy is reserved for small business and for those smaller businesses that have a much smaller base and that are owned by one person rather than larger, franchised businesses.
For those small business owners that also have personal debt, chapter 7 does have the ability to resolve debt for both cases which makes it a great option that is easier than filing two separate filings and that does make taking care of your bankruptcy easier.
Chapter 7 Filing for a Small Business- Sole Proprietor
- Chapter 7 is often referred to as a liquidation bankruptcy. This means that some of the items that are present are used for bankruptcy and for helping to settle some debts. In most cases, your only going to seek to file for a chapter 7 bankruptcy in cases where the best that is owed is so substantial that there is really no way to restructure and to change the format of the debt or how it is paid back.
- In some cases, this is the best option for those businesses that might not be able to continue on or that are going to take a break and try again later when their finances are a bit more stable.
- This type of bankruptcy is best when there are no major assets in the business like a building or a ton of product that is sitting around and that needs to be sold or used up.
- If someone has a business for instance where they provide a service or they provide a skill, it is going to be more beneficial to file a chapter 7 bankruptcy than it would be to attempt to pay off any debt and keep the business open.
- This means that if the owner decides to go back later and start again, they are not going to need a ton of different materials or a ton of different items to start back up again making a chapter 7 bankruptcy make more sense.
How Can We Keep the Business in a Chapter 7 Filing?
When a chapter 7 filing is put into motion a trustee is appointed to help sell off assets that can be used to pay off the debt that has accumulated. This means that the trustee is going to sell anything that is not exempt so that they can try to get back as much of the money that was lost as possible. If you want to keep the business and potentially start over or use the idea again, you will want to make sure that you list the business itself as an exemption.
There are some common items or assets that are considered to be exemptions or that are used as exemptions and they can be the business itself, the ownership interests like any stock or shares in the company, and even the equipment that was used to make the business operational.
It does depend state to state what can be counted as an exemption and what does not count. In California, you can keep the business exempt in a filing for bankruptcy. You just need to make sure that the exemption is listed before the selling of assets begins.
Chapter 7 filing Procedure for Businesses in California
- The process of filing chapter 7 bankruptcy in California takes about 6 months in total from start to finish.
- You will first meet with a lawyer or a bankruptcy attorney to see if you qualify for chapter 7 bankruptcy.
- This is not a blanket type of bankruptcy that everyone can file for. Your attorney will have to petition the court to allow you to file for chapter 7 and to make sure that the business or the person that is filing for this type of bankruptcy is indeed qualified to file chapter 7.
- The next step will be to name the exemptions once you have been approved. This means that you will work with your lawyer to list what you want to keep exempt from the filing. This can be the business itself, the equipment used for the business and even the ownership interests in the business.
- After exemptions have been filed, the selling off of assets will begin. Your chapter 7 advocate or bankruptcy trustee will work to sell off assets that can be sold off to make back money that was lost. They will work to sell off as much as possible so that they can recoup as much money as possible from the sale of the assets that are associated with the business that is filing.
- For individuals that are the sole proprietor of the business, you can also roll in your own debts to have them settled along with those of your business. It is important to take the time to discuss the process fully with your lawyer and to take the time to learn about what is being discharged and what the overall process will look like from start to finish.
If you have any questions then consult with our experts at Berneman Law Firm.
Call at – 8054927045, 8776200044 (Toll Free – 882004443)