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The benefits of bankruptcy protections for struggling businesses

The business bankruptcy process provides helpful options and protections for struggling businesses regardless of their circumstances. Businesses that are looking to get back on their feet can benefit from the Chapter 11 bankruptcy process. Alternately, businesses that do not plan to continue, and plan to close their doors, can also benefit from bankruptcy protection options including Chapter 7 bankruptcy.

Chapter 11 bankruptcy is a business bankruptcy option that allows a struggling business to reorganize its debt, restructure and potentially seek new sources of capital while remaining in business. In most instances, a business going through the Chapter 11 reorganization process will be permitted to remain in business. During that time, they may also be able to renegotiate some of their contracts or leases. This may allow the business to return to profitability at the end of the Chapter 11 bankruptcy process.

On the other hand, Chapter 7 bankruptcy is also available to struggling businesses as a process that allows the business to liquidate assets to repay creditors. When a struggling business has made the difficult decision to close its doors, Chapter 7 bankruptcy may be an option to consider to help it through that process. Another benefit business bankruptcy protection is the automatic stay which prevents creditor collection actions during the bankruptcy process.

There are different bankruptcy options for struggling businesses to consider and the best option depends on the situation, needs and goals of the business. As a result, businesses considering filing for bankruptcy should understand the different options and protections available to them so they can decide whish is best for their business and circumstances.

FindLaw Network