Small Business Bankruptcy in Arizona
Many small businesses struggle financially. This is a risky venture and the vast majority would not make it past the first year of existence. Has your Arizona small business gone under financially? Are you thinking of ways to rescue it? If so, declaring bankruptcy is probably one of the options that have come to mind. Can a small business bankruptcy in Arizona be declared and if so, what are the terms and conditions?
Bankruptcy Options for Small Businesses
Small businesses in Arizona can declare bankruptcy.
Just like in the case of individual filing, a business bankruptcy is used to mitigate debt and financial burden. Business owners can choose among several possibilities when it comes to bankruptcy:
- Chapter 11 bankruptcy: whenever a business is under the ownership of several partners, when it is a limited liability company or a corporation, a Chapter 11 bankruptcy filing can apply. Chapter 11 bankruptcy allows small businesses in Arizona to remain operational while also paying off some of the accumulated debt.
- Chapter 13 bankruptcy: this is yet another debt restructuring option. Chapter 13 bankruptcy makes it possible to reorganize and pay off a portion of debt. The repayment plan will be valid for a certain period of time, after which debt discharge will occur.
- Chapter 7 bankruptcy: this option is available to business owners who decide to close down the business and terminate its operation. When the process is completed, debt liquidation can occur through a Chapter 7 bankruptcy filing.
When Should a Business Bankruptcy Filing Occur?
Just like in the case of personal bankruptcy filing, a corporate filing will occur whenever a lot of debt has been accumulated and the management is no longer capable of giving back to creditors.
The important decision that an owner will have to make is whether to keep the company operational or to shut it down.
Debt restructuring makes sense for businesses that have loyal clients and that are generating revenue. Through debt restructuring and a favorable payment plan, the management can take care of the debt without having to terminate corporate activities.
Chapter 7 bankruptcy is a suitable choice for businesses that are already “dying.” The need for bankruptcy becomes even higher in the case of owning a lot of business inventory that an owner doesn’t know what to do with and in the case of being sued by multiple creditors.
Most often, business owners will pursue Chapter 11 bankruptcy. Through careful debt reorganization, a company can come out of the process financially stronger than it used to be.
Choosing the Right Type of Small Business Bankruptcy in Arizona
It’s important to understand that Chapter 7 and Chapter 13 bankruptcies for businesses are not the same as the filing for individuals. If you believe that bankruptcy is the way to deal with corporate financial trouble, talk to an experienced Arizona attorney to determine under which chapter to file.
While both Chapter 11 and Chapter 13 bankruptcies feature debt restructuring, a Chapter 11 filing tends to be favored. There are several reasons why.
Chapter 11 bankruptcy does allow for a lot more flexibility. In addition, this is the option that corporations and partnerships can opt for. Chapter 13 bankruptcy filings tend to be concluded faster and they’re more affordable.
Chapter 7 bankruptcy will initiate liquidation proceedings. All assets, inventory, products and supplies under the ownership of the company will be liquidated for the purpose of paying off debt. Some debt varieties will be treated as priority and these payments will occur first. Some priority debt varieties include unpaid wages, taxes owed to governmental agencies, mortgage and rent payments, utility bills and insurance payments.
Non-priority corporate debt may consist of business credit card debt, a few types of bank loans and debt on non-essential business supplies.
As you can see, the type of business, its financial health and your plans for the future have to be considered. When it comes to choosing the right chapter for small business bankruptcy in Arizona, take the help of experienced bankruptcy lawyers. Bankruptcy filing could be used to get out of financial trouble but the selection of the best restructuring or liquidation plan will be essential.