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How To Protect Assets In Bankruptcy
There are times when your business runs into deep crisis. You are unable to pay creditors in time and foreclosure is looming large on your business. In such a condition the business may be acquired by creditors like banks for recouping the loan amount. Filing for bankruptcy under Chapter 11 allows a struggling business to retain its assets from creditors and continue operation.
Bankruptcy laws under Chapter 11 allow you to save your assets that you may deem necessary to restart or carry on your business. The loan along with accrued interest is consolidated and repaid back to creditors in easy installments. This is in contrast to filing of bankruptcy under Chapter 7 where all assets of a business are liquidated and the business ceases to be as an asset of the defaulter. Let us have a quick look on how to protect your business assets while filing for bankruptcy.
Determination Of Provision
The process starts by determining whether the business is eligible for a Chapter 13 or Chapter 11 bankruptcy. Chapter 13 is similar to Chapter 11 but usually reserved for individuals but small businesses and some partnerships are eligible to file under Chapter 13. Both chapters have aim to reorganize debts and cure it through a long term repayment program. Many businesses benefit from this reorganization process. It provides them with the much needed breathing space to reorganize their business plans.
Eligibility And Rules
There are certain eligibility rules for filing bankruptcy under Chapter 11. The debtor can be a corporation, partnership, individual or a sole proprietor. The file should clearly mention the assets, current income and expenses, financial affairs and contracts or leases of the concerned entity filing for bankruptcy. A debtor is allowed to file a reorganization plan upto 120 days after filing for bankruptcy. Usually acceptance of the plan typically occurs within 180 days of filing bankruptcy petition.
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Identifying And Listing Debts
Make a list of all assets and liabilities of your business. Make sure that you there is no debt that is left unaccounted. There are some businesses where only the owner is aware of some classified information pertaining to brand value, satisfied customer base and assets build up over years. The trustee appointed by bankruptcy court to evaluate your assets should not be aware of such classified information. The trustee is assigned to locate assets that you are not able to protect and sell them to pay your creditors.
Most small businesses don’t have valuable assets or inventory. If there are equipment and machines that are fully owned by the business then you need to evaluate their value before including them in bankruptcy filing. When your creditors are aggressive then it is more crucial to evaluate value of the assets. It is crucial for protection of business assets during bankruptcy filing.
Avoid doing anything that can delay the claim of creditors or hinder the settlement process. Such acts may be considered fraudulent by authorities. Check the exemption limit offered by your state. The extent of property that you can protect may vary from state to state.
Hiring a competent bankruptcy lawyer is essential for filing your bankruptcy petition. Companies should be represented by lawyer in a bankruptcy court.
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