Business Bankruptcy – What Types of Assets Can a Company Own?3 min read
Business bankruptcy can be a scary, stressful time for entrepreneurs. But if your business is struggling to pay its debts, filing for bankruptcy may be the best option for you.
Bankruptcy can help you restructure your debt and get a fresh start. It also puts a hold on your repayments while the court considers your situation.
There are a number of different types of assets a company can own. These can include products, equipment, inventory, a contact list and even goodwill.
When a company files for bankruptcy, the court appoints a trustee who is responsible for liquidating all of the business’s assets to pay off its creditors. This is called a liquidation and is the best way to close down a business in the most orderly manner possible.
There are two main types of business bankruptcy: Chapter 7 and Chapter 11. In a Chapter 7 case, the court will liquidate all of the assets in order to pay off as many of your creditors as possible. A chapter 11 is more complicated and can only be filed by businesses that have substantial assets or plans for future growth. A Chapter 11 might also be the right fit for a company that is in the middle of a business downturn and is in need of some serious restructuring to make its way back into the black.
A business liquidation is the sale of a company’s assets in order to pay creditors and settle any legal disputes. After all claims have been settled, the residual funds are distributed among shareholders and owners.
Liquidation is a popular method for companies that are no longer able to pay their debts or are insolvent. The process usually involves a court appointed trustee.
The proceeds from the liquidation of a company are used to repay unsecured and secured creditors. Those with collateral such as property will have their assets returned to them.
Creditors with other types of claims, such as those for unpaid wages or other entitlements, may also be repaid through the liquidation. They should file a claim with the court before the business is completely liquidated.
Some creditors may want to attend a meeting of creditors that takes place after the company is completely liquidated. They can do this by completing a proxy form and providing it to the liquidator before the meeting.
A business reorganization is a company’s effort to improve efficiency and reduce costs. This often involves a restructure of the organization’s business units, departments, and employee roles, which can include significant layoffs.
Reorganizations can also be made in response to financial duress, a desire to change strategy, or government order. They may involve changing a company’s ownership structure, combining or selling unprofitable business units, changing the way employees are paid, or renegotiating debt agreements.
However, reorganizations are not without their own problems. A McKinsey survey of reorgs shows that more than 80% fail to deliver the expected results and 10% cause real damage to the company.
Discharge of Debts
Bankruptcy is a legal means for debtors to get out from under their financial burdens. It gives them a fresh start and gives them a clear field for future effort.
A discharge is a court order that releases a debtor from personal liability for specific debts and prohibits creditors from taking any action to collect the debts in question. It also prevents creditors from communicating with the debtor about those debts, including calls, letters, and personal contact.
However, secured creditors may still have some rights to seize property securing an underlying debt even after a discharge is granted. If a debtor wishes to keep secured property after a discharge is entered, he or she must sign and file with the court a “reaffirmation” agreement.
If you are considering filing for bankruptcy, a skilled attorney can help you determine the best course of action. They can also guide you through the process, ensure your case runs smoothly and maximize your chances of receiving a discharge.