Bankruptcy Attorneys Serving Businesses in North Carolina
Businesses that are struggling with substantial debt or companies that are in financial distress may be considering bankruptcy. Depending upon your type of business structure, multiple different types of bankruptcy options may be available to you. Some types of bankruptcy allow businesses to reorganize debts and to remain open during the bankruptcy process. Others require a business to close and for assets to be liquidated to repay creditors.
It is important for business owners to understand the different bankruptcy options that may be available, and to work with an experienced North Carolina business bankruptcy attorney on your case.
Different Types of Business Bankruptcy
Several different types of bankruptcy may be available to small businesses and large corporations depending upon the particular business structure. The following are the three common types of bankruptcy that can be options for businesses in North Carolina:
- Chapter 7 bankruptcy: This is a “liquidation” bankruptcy. Any type of business may be eligible to file for Chapter 7 bankruptcy, from a sole proprietorship to a large corporation. With a Chapter 7 bankruptcy, business assets must be liquidated and the business must close. While Chapter 7 is not limited to particular types of businesses, sole proprietorships may have to take additional steps to prove eligibility for Chapter 7 bankruptcy. Most other business structures do not have to pass the “means test” in order to be eligible for Chapter 7 bankruptcy since this is a test for consumers seeking bankruptcy protection. However, sole proprietorships are different since the individual business owner and the business are, in effect, the same entity. In other words, personal debts are business debts and vice versa.
- Chapter 11 bankruptcy: This is a type of “reorganization” bankruptcy that allows the debtor to reorganize debts and to make payments according to a payment plan over a period of typically two to five years. Chapter 11 is the most common type of reorganization bankruptcy for businesses. It allows businesses to remain open while they develop a plan for repaying debt. At the end of the repayment plan terms, if the business has abided by the terms, remaining debts can be discharged and the business can move forward.
- Chapter 13 bankruptcy: This is also a type of “reorganization” bankruptcy, but it is designed for consumers. A business that is a sole proprietorship that wants to seek bankruptcy protection but does not want to close its doors—or that may be ineligible for Chapter 7 bankruptcy—may be able to file for Chapter 13 bankruptcy. It works similarly to Chapter 11 bankruptcy, but filing fees generally are less, and it is only available for secured and unsecured debts up to a certain amount.
Determining what type of bankruptcy is right for your business can be complicated. An experienced North Carolina business bankruptcy lawyer can explore your options with you and can discuss the benefits and limitations of both liquidation bankruptcy and reorganization bankruptcy.
Contact Our Attorneys in Raleigh, New Bern, or Morehead City
Our clients seeking representation in business bankruptcy trust Howard Stallings Law Firm to advocate to mitigate their potential losses. Our reputation for litigation throughout North Carolina speaks for itself. Call us today at 919-821-7700 or contact our office online. Free parking is available at our locations.