When filing for bankruptcy for a corporation there are a few options of the proper kinds of bankruptcy. The following is merely an quick overview and we suggest you seek out an experienced bankruptcy lawyer. In Utah that would be us!
A Chapter 7 bankruptcy will be able to provide an orderly liquidation of the debts and of the business assets. In order to file for a Chapter 7 bankruptcy for a corporation, LLC or business, you need to file certain documents and pay fees related to the bankruptcy. Since both corporations and LLC are separate legal entities, in most jurisdictions they will need an attorney to represents them. Corporations and LLC’s do not receive a discharge through a Chapter 7 bankruptcy, instead their assets are sold and the proceeds are distributed among the creditors according to who has the highest priorities. The disadvantage of filing for a Chapter 7 bankruptcy for an LLC or a corporation is that it means the end of business and you will no longer be able to function as a normal third party business. If you were responsible for the company’s debts then you might have more personal liability than if you had sold the assets yourself and negotiated with the creditors.
A Chapter 11 bankruptcy will allow the corporation to restructure and reorganize its debts. In this kind of bankruptcy the company proposes a plan to work its way out of the financial situation in which it finds itself. The creditors of the corporation then have a chance to vote on the plan and even form a separate creditor committee to look out for their own interests. Given the nature of the bankruptcy code, the time and cost associated with filing a Chapter 11 bankruptcy the cost can be prohibitive to many small to medium sized corporations.
Some family farm or family fishing business may benefit from filing for a Chapter 12 bankruptcy. In this type of bankruptcy the debts are restructured and a repayment plan is proposed to the creditors. There are a number of limitations on this kind of bankruptcy and help from an experienced attorney is recommended.