As a business owner in Texas, you may feel that the struggle to keep your company running is losing steam as your liabilities exceed your assets. If keeping up with creditors has become difficult or impossible, it may be time to consider whether bankruptcy may be your best solution. Bankruptcy can provide relief, but it does not necessarily mean shutting your company’s doors forever.
At Gipson, Norman & Root, we often provide business owners with assistance in determining what type of bankruptcy may be right for them and their companies.
Chron.com notes that liquidating assets to pay debts is what many people think of when they hear the word bankruptcy. In Chapter 7 bankruptcy, the trustee appointed to your case will determine the value of your company and the amount of its financial liabilities. He or she will sell the assets and pay creditors in a certain order.
Lenders of secured debts may foreclose on the properties, such as the place of business or vehicles. Unsecured debts have a lower priority, and if the liquidated assets do not provide enough to cover these, the court may discharge them in bankruptcy.
If you do not have the cash flow to cover all your debts, you may still be able to keep your business running through a reorganization. Chapter 11 and Chapter 13 bankruptcy plans allow business owners to restructure payment plans so that they are manageable. Companies that file for one of these types of bankruptcy will not liquidate their assets, and will likely pay all or most of their debts over time.
You can only file for Chapter 13 bankruptcy if your company is a sole proprietorship. Other factors may be relevant to whether you can file for Chapter 11 or Chapter 13 and keep your business open.
More information about business bankruptcy is available on our webpage.