Frequently Asked Questions About Business Bankruptcy
If you are considering bankruptcy for your business, you most likely have many questions about the bankruptcy process. I am here to provide answers. My name is Kell C. Mercer, and I have over 20 years of legal experience serving Texas businesses. I answer bankruptcy questions for clients every day. Below are some of the questions I hear most often.
What Is The Difference Between Chapter 7 And Chapter 11 Bankruptcy?
Chapter 11 does not eliminate all debt and allows a business to keep certain property and keep operating while reorganizing debt and creating a plan to pay it off over time. Chapter 7 often requires more liquidation of assets and is the best option if you plan to close down operations. Both have legal criteria you must meet. A skilled bankruptcy attorney can review your situation and advise you regarding which type of bankruptcy best fits your needs. Your attorney can also tell you whether you will need to file a petition for personal bankruptcy.
Do We Have To Liquidate Our Assets?
That depends on the type of bankruptcy you file and how your assets and debts are structured. Most companies find they must liquidate at least some of their assets to meet their debt payments. If a creditor forced you into bankruptcy or you file Chapter 7, you will likely have to sell more of your assets. Secured creditors may also choose to foreclose on your property and sell your distressed assets.
Do All Debts Get Discharged?
Discharge of debts in bankruptcy depends on the type of bankruptcy and the type of debt. You cannot discharge certain debt in bankruptcy, including:
- Money obtained by fraud
- Debt that is the result of negligence
What Is A Receivership?
Receivership is another tool creditors have to take control of a business’s assets and debt outside of bankruptcy and foreclosure. Texas law allows the creditor to control certain assets in a variety of situations, and may be less costly and more affordable than a forced bankruptcy.
What Does The Bankruptcy Trustee Do?
The bankruptcy court appoints a trustee to oversee the bankruptcy and the business payments during the process. Depending on the type of bankruptcy, the trustee may take a role in the business and liquidating the assets. The trustee ensures creditors are paid on time.