Businesses throughout Pennsylvania suffered a devastating loss of income due to the COVID-19 pandemic. Thus, many businesses are unable to pay their debts are uncertain of their options for regaining financial stability. Fortunately, many businesses are eligible to seek debt relief via bankruptcy. If you have a business in Pittsburgh and intend to file for bankruptcy it is critical to consult a skillful Pittsburgh bankruptcy attorney to discuss the benefits and detriments of each type of bankruptcy filing, and to develop a plan to suit your needs.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy, often referred to as liquidation bankruptcy, is generally suited for business that no longer wish to remain in operation. Chapter 7 bankruptcy is an option for many types of businesses, including limited liability companies, partnerships, corporations, and people working as sole proprietors. When a business files for Chapter 7 bankruptcy, the business assets will be liquidated and used to pay creditors. It is important to note, though, that a Chapter 7 business bankruptcy filing does not eliminate personal obligations on business debts for limited liability companies, corporations, or partnerships. Owners and partners can file for Chapter 7 bankruptcy separately, to discharge their personal debts, however. People who operate as sole proprietors can eliminate both personal and business debts through a single Chapter 7 bankruptcy filing, however, as a sole proprietorship is not recognized as a separate legal entity.
Chapter 11 Bankruptcy
Generally, Chapter 11, which is often referred to as reorganization bankruptcy, is best suited for larger corporations. Chapter 11 allows businesses to remain in operation while reorganizing and repaying their debts. It is expensive and complex, however, so smaller business don’t usually choose this option despite it being available to corporations, partnerships, or LLC’s. Businesses that file for bankruptcy under Chapter 11 must submit a written disclosure statement and a plan of reorganization to and for approval of the bankruptcy court. These plans usually include modifications on payment terms for existing debts or the sale of assets to cover the costs of some of the debts. The disclosure statement must contain information concerning the assets, liabilities, and business affairs of the debtor sufficient to enable a creditor to make an informed judgment about the debtor’s plan of organization. In filings that involve “small business cases,” however, the debtor may not need to file a separate disclosure statement.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy is only available to people filing as individuals. In other words, a sole proprietor can file for Chapter 13 bankruptcy to reorganize both business and personal debts, but partners, or people who own limited liability companies or corporations cannot file for Chapter 13 bankruptcy on behalf of their businesses.
Contact a Knowledgeable Pittsburgh Bankruptcy Attorney
An unexpected decrease in revenue can cripple a business financially, but many businesses can seek from their debts via bankruptcy. If you need help filing for bankruptcy, recovering funds that have been garnished, or dealing with your creditor, contact the Pittsburgh bankruptcy attorneys at Hardin Thompson PC at 412-315-7195 or via our online form.