Filing for bankruptcy is not something any business looks forward to. However, when business debt becomes overwhelming, bankruptcy might be the only option left. Finding out what types of bankruptcies provide business debt relief and how these processes work may help you decide whether to take this step. You can also talk to a Tullahoma bankruptcy lawyer to evaluate your options.
How Bankruptcy Provides Business Debt Relief
Bankruptcy comes with advantages and disadvantages. The most well-known disadvantage of bankruptcy is a lower credit score. This low credit score only lasts a certain period of time and can be rebuilt over time. One of the challenges is trying to rebuild credit while also trying to rebuild financial trust.
The main advantage of filing for bankruptcy is escaping your debt. Debt discharge completely erases all debt that qualifies for discharge. Taxes, for example, cannot usually be discharged.
You may or may not lose property depending on the type of bankruptcy you are filing for. Some forms of bankruptcy require you to sell some or all your property to pay back the debt. Other forms of bankruptcy require you to follow a new debt repayment plan for a specified period of time.
The two types of bankruptcy available for businesses are Chapter 7 bankruptcy and Chapter 11 bankruptcy. Learning more about what each one involves may help you decide which bankruptcy to file for.
Types of Bankruptcy for Business Debt
To file for Chapter 7 bankruptcy, you must be an individual, corporation, or business. Business partnerships may also file for Chapter 7 bankruptcy. Chapter 7 bankruptcy has a trustee take over and sell your property to pay back the debt to your creditors.
The idea of selling off your property may sound scary, but this process can potentially erase all your existing business debt. There are also exemptions that protect certain types of property from being sold. Types of property that are exempt vary by each state. In some cases, a reaffirmation agreement can also prevent certain types of properties from being sold.
Filing for Chapter 11 bankruptcy is exclusively for businesses that want to keep working as a business. Unlike Chapter 7 bankruptcy, which requires selling property to repay debt, this form of bankruptcy involves reorganizing your debt. Instead of a trustee selling your property, a new debt repayment plan will be created.
Creditors will be stopped from taking any actions against you during this process. A new contract is created between you and your creditors to pay back debt. This may include a lower interest rate, extended repayment, and lower monthly payments. Bankruptcy courts must approve the new repayment plan and the creditors must agree to the new terms of the repayment plan.
Contact Tom Bible Law Today
You might be able to overcome your business debt. Do not hesitate to contact us at Tom Bible Law today at (423) 424-3116 for a consultation about your legal options related to bankruptcy. Our legal team of Tennessee bankruptcy attorneys might be able to help you escape your business debt through bankruptcy. We are located in the Tennessee cities of Chattanooga and Tullahoma.