Hamilton County is like other communities throughout Ohio that depend upon the success of small business owners to keep their economies strong. According to the U.S. Small Business Administration, small businesses are responsible for 54 percent of total sales in the U.S. and 55 percent of the jobs. Cash flow challenges and mounting debt can put a squeeze on the financial stability of even a well-managed company.
When business debts negotiations with creditors fail to provide a solution to the financial troubles of a struggling business, business bankruptcy might offer a viable solution. Depending upon the type of bankruptcy chosen, either Chapter 7 or Chapter 11, a business might be able to continue to operate during the bankruptcy proceedings and after they have concluded.
A Chapter 11 bankruptcy allows an owner to remain in possession of the assets of the business while continuing to operate it. Unlike other bankruptcy proceedings in which the person filing the petition must deal with a trustee, a Chapter 11 bankruptcy allows the creditors to negotiate directly with the business owner to agree to a business reorganization plan that will address the liquidation of debts in a manner that is fair and equitable to the creditors.
The goal of a Chapter 11 bankruptcy is to have the business emerge from it in a better financial condition that will allow it to continue its operations. Unfortunately, some businesses get to the point where business reorganization is not an option. For those businesses, Chapter 7 bankruptcy might be a better course of action.
Once a Chapter 7 petition is filed with the court, a trustee is appointed to take control of the financial affairs of the business, obtain an asset valuation and cause sale of its assets. The money raised by selling the assets of a business is used to pay creditors. Most debts that are left unpaid after the liquidation of assets are discharged, but the business ceases to exist.
The decision by a small business owner to file for bankruptcy is a difficult one that should only be made after seeking the advice of a knowledgeable bankruptcy attorney. This post is an overview of business bankruptcy, but it is not offered, or intended to be relied upon, as legal advice.