Businesses go out of business for a lot of reasons. The most common though comes down to simple math. More money going out than coming in. Eventually that equation makes maintaining your business unsustainable. What do you do though? How do you resolve your business? You could pay off your debts, close the doors, and move on, or you could file for Chapter 7 bankruptcy. Let’s go through reasons to consider Chapter 7 when going out of business.
What is the Advantage of a Chapter 7 Bankruptcy?
Before we get into the advantages, we have to tell you that Chapter 7 bankruptcy isn’t for everybody. Some people may prefer to handle the end of life of their business on their own, and we’ll talk more on that below, but first let’s cover some key advantages of Chapter 7 bankruptcy.
- Collection Stops—If you were getting hassled day in and out by creditors, telling them you are going out of business isn’t going to stop them. Only two things will: paying them or filing for bankruptcy.
- Creditors Will Be Paid Fairly—After a trustee is appointed, your business assets will be liquidated and the funds from that liquidation will be fairly distributed amongst your competitors.
- Avoid Future Litigation—Chapter 7 Bankruptcy drastically reduces the chances of your creditors filing lawsuits against you in the future.
Can You Handle Going Out of Business Yourself?
There are a couple of drawbacks to a Chapter 7 bankruptcy for your business. Chapter 7 bankruptcies are public, they can be time-consuming, and the liquidation process will often fetch lower prices for your assets than they would during a normal sale.
It’s possible—especially with legal help such as what can be provided by Kerkamn & Dunn here in Milwaukee—to close your business without filing for bankruptcy. This will allow you to choose the order in which creditors get paid and allow you to liquidate your assets at market rates.
Some businesses are able to be entirely liquidated, get their assets paid off, and still have money left over. You may not know the full picture and how the best way to close the doors on your business, but an experienced legal team can help.
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If you need help seeing your business through to the end of its life, or even if you just want to explore your options and try to discover if there is any way to keep your business afloat. That’s where Kerkman & Dunn come in. We can help you determine the best way forward for your business. Reach out to us with all your needs and concerns.
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