Will My Personal Assets Be Impacted By Filing A Business Bankruptcy?
The filing of a business case will generally not affect personal assets and property. However, it is common for individuals to have allowed secured parties to obtain liens on their homes or other assets. For instance, an operating capital loan of a business may be guaranteed by the owners of the company and also may have as additional collateral some personal assets. It depends on the facts and circumstances of each situation, but if a secured lender has no recourse against the individuals based upon their loan and no guarantee, then the business will be able to operate and the individual’s assets won’t be affected.
Can My Business Remain Open If I File A Business Bankruptcy?
Businesses can remain open after a Bankruptcy filing only if they choose to file under Chapter 11 of the Bankruptcy Code, where they are considered debtors in possession of their assets with the authority to operate their business. Chapter 7 debtors are prohibited under any circumstance, to operate once they file their Chapter 7 case. Under limited circumstances, a Chapter 7 trustee appointed in the case can operate a business for a specific purpose for a limited duration. However, the business in a Chapter 11 would be required to comply with all the operating requirements in a Chapter 11, which include monthly operating reports to be filed to the United States trustee of all receipts and disbursements. Individuals who are sole proprietors can operate their business in a Chapter 13 case.
How Often Can A Business File For Bankruptcy?
There isn’t any specific requirement that a business, after one Chapter 11 case are prohibited from filing a second case. However, each case that is filed will be evaluated as to the change to circumstances that may have occasioned the new filing and also the reason for the failure of the prior case. Each new Chapter 11 case must be filed in good faith. Chapter 11 is a reorganizational remedy set forth in the Bankruptcy Code and requires a proper purpose and presumptive good faith towards addressing the entities financial affairs. If a company has filed for bankruptcy and confirmed a plan, and cannot fully comply with the financial obligations of that plan, there are times where one case is followed by a new Chapter 11 bankruptcy. Cases can become complicated because the prior confirmed plan is a contract with creditors and that will become an issue as to whether there has to be compliance with the terms of the prior plan, and whether obligations can be enforced by the creditors in the new case.
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