What Is Business Bankruptcy?
The simplest and most common type of bankruptcy is Chapter 7. The court will appoint a trustee. The trustee may be an individual or an entity, and they will be responsible for liquidating your business assets to pay off as much debt as possible.
When filing chapter 7, the first step is to sit down with an accredited credit counseling organization and comb through your finances. During this grueling process, you will be required to examine your finances in detail and evaluate if bankruptcy is genuinely the best option for you.
If you decide to move forward, the courts will need to see a certificate to prove that you’ve finished the credit counseling process. The courts will charge a set fee to start the bankruptcy proceedings. On top of those fees, you will need to hire a lawyer to assist you in filling out a variety of papers and paperwork.
These documents are your initial declarations of property that you believe should be protected from collections and your assets. You must be truthful in these documents, as individuals who are found to have omitted or lied may face penalties.
You relinquish control of your assets and information to the bankruptcy court at this stage, and a Trustee is appointed. One thing to keep in mind is that the Trustee primarily serves the interests of your creditors. Their ultimate goal is to remit as much money as possible to your creditors while following the regulations objectively to provide you with a fair bankruptcy process. Your creditors are likely to absorb considerable losses from your bankruptcy.
Notably, there is a financial gain for trustees. They are usually paid out from a percentage of assets seized.
After this, the trustee will ask you about your prepared papers in a series of events and meetings in which you will be physically present. Creditors may be present and have the opportunity to interrogate you, although this is uncommon.
Finally, you will be expected to complete further training on the subject of financial management. The US Trustee will usually provide you with a small list of training courses from which to pick.
A Notice of Discharge will be filed with the court at some point, and you will have a specific period of time (usually a few months) to wait once you get it. You have completed the bankruptcy procedure at this stage, and most or all of your business debt has been dismissed.