A debtor considering bankruptcy must bear in mind that a bankruptcy stays on his or her credit report for up to 10 years, making it difficult to get future credit such as mortgages and that any credit extended will probably cost more in terms of interest rates and fees. A debtor should also keep in mind that some debts must still be paid. Accordingly, it is essential to seek the advice of an experienced bankruptcy attorney before making potentially life-altering financial decisions.
Debt, whether from credit cards, medical expenses, mortgages, car loans or other sources, can mount quickly, and you may find yourself unable to keep up. At the Phoenix law office of Joseph C. McDaniel, P.C., our attorney has more than 30 years of bankruptcy law experience, and is one of fewer than 30 lawyers in the state designated as a Certified Specialist in Bankruptcy Law. If you are struggling with overwhelming debt, we can help you understand your bankruptcy options and get the debt relief you need.
We encourage you to learn more about our Arizona bankruptcy law practice. Our firm is dedicated to combining high-quality legal representation with the personal attention and service. Call 602-297-3025 or contact us online to schedule an appointment with an experienced Arizona bankruptcy lawyer. Your initial consultation is free.
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When you are facing overwhelming debt, turn to the experience and skill of Joseph C. McDaniel, P.C. Call 602-297-3025 or contact our Arizona office to schedule an appointment with an experienced lawyer.
Bankruptcy is your legal right to debt relief. Call 602-297-3025 or contact us online to schedule an appointment and find out how we can help you get a fresh start.
Commercial Bankruptcy
Like a consumer, a business sometimes finds itself in the uncomfortable position of being unable to pay its debts. One solution is to file for bankruptcy, a legal process in federal bankruptcy court that releases the business from the obligation to pay all or some of its debts. The experienced lawyers at Joseph C. McDaniel, P.C. in Phoenix, Arizona advise business owners about whether bankruptcy is right for them.
Bankruptcy Choices for Small Businesses
Businesses must choose among alternative types of bankruptcies, each of which corresponds to a different chapter of the federal Bankruptcy Code. Businesses usually choose either Chapter 7 or Chapter 11, or occasionally Chapter 13. Sometimes businesses can be involuntary drawn into bankruptcy by their creditors, who face stiff financial penalties if they initiate an involuntary bankruptcy for invalid reasons.
Chapter 7
Chapter 7 bankruptcies are called "liquidation bankruptcies." Chapter 7 is usually employed by consumer debtors, but can also be used by businesses that want to liquidate their assets to be relieved of debt. A Chapter 7 bankruptcy is commenced when the business files a petition with the bankruptcy court. The court then orders an automatic stay of all collection action against the business and its property. A court-appointed trustee manages the details of the bankruptcy, selling business assets to satisfy business debt, to the extent possible. At the conclusion of the proceeding, remaining debts of the business are not discharged as with an individual debtor, but generally the business ceases to exist because its assets are gone and it is no longer a profitable concern.
Chapter 11
In Chapter 11 bankruptcies, which are usually filed by businesses and rarely by individuals, the commercial debtor is usually allowed to stay in business throughout the bankruptcy proceedings. A business debtor may only operate independently in its ordinary course; transactions outside the ordinary course of business require court approval.
A Chapter 11 proceeding, like one under Chapter 7, is initiated by filing a petition, but a trustee is not automatically appointed. Although the bankruptcy judge may decide to appoint a trustee in a Chapter 11 case, it is the exception rather than the rule. As in Chapter 7, the filing of the bankruptcy petition stops creditors from attempting to collect their debts.
The debtor has time to file a proposed plan of reorganization. The plan of reorganization sets forth in detail how the debtor intends to conduct its business, while continuing to make payments to its creditors. In some situations, creditors may instead or also propose plans of reorganization. Creditors are divided into classes with varying rights depending upon the types of debt they hold. The approval process involves negotiation and input from creditors. Ultimately, a plan must be approved by the court. In some cases, the court approves the plan even though some of the creditors did not. If no plan is approved, however, the bankruptcy is often converted to a Chapter 7 liquidation or may be dismissed.
The choice between Chapter 7 and Chapter 11 is not necessarily permanent; once proceedings have begun, a case may be converted to a different chapter, under certain circumstances.
Conclusion
Bankruptcy may not be the best option for every business, but sometimes it is the best choice a business owner can make. Alternatives to bankruptcy include working informally with creditors toward a repayment plan or assigning assets for the benefit of creditors. A lawyer experienced in bankruptcy law, like those at Joseph C. McDaniel, P.C. in Phoenix, Arizona, can help a business decide whether bankruptcy best meets its needs.
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