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The best way for businesses to have their debts written off without winding up their business is debt reorganization. A chapter 11 Monterey residents should know, is a special type of bankruptcy that has been designed specifically for businesses. It is similar to chapter 13, except for the fact that the latter is meant for individual debtors, while this option is meant to be used by businesses.
A business has different types of assets, including; inventory, office equipment, plant and machinery among others. The lease and any goodwill are also considered assets that can be liquidated to pay off debts. This bankruptcy option allows the company or partnership to retain these assets. In return, the business makes monthly payments to clear its debts.
The first thing the judge will do after receiving a bankruptcy petition is appoint a trustee to supervise the entire process. After being appointed, the trustee will become a board member and the most powerful decision-maker. In fact, no important decision can sail through without the trustee giving approval. For instance, the management cannot hire new employees without the approval of the trustee. Furthermore, the trustee can cancel all overseas holidays for managers and fire non-essential employees.
During the bankruptcy process, assets cannot be disposed of. Buying of new assets will also be kept to the minimum. This will be the status quo throughout the bankruptcy process. It is important for business owners to keep this in mind when seeking to have their business declared bankrupt.
The moment a bankruptcy petition has been filed in court, the first thing the court will do is order the debtor to submit a plan on how they intend to service their debts. The plan must take into consideration all the overheads and monthly income. It is important to note that if a business has little to no income, this option will be taken off the table and liquidation recommended by the trustee. In such a case, the business will be wound up.
When writing the plan to repay business debts, the management of the firm will have to consider all the overheads as well as their projected income in the next couple of years. The plan must be reasonable and fair. It should take into consideration the average monthly revenue over the last couple of months. The plan will be presented to creditors by the management for approval. The court has the final say as far as approval of the plan goes.
It is important to note that creditors can take a legal entity to court and have it declared bankrupt to pave way for recovery of their debts. This is normally called involuntary bankruptcy. If successful, the accounts and assets of the business will be frozen to pave way for bankruptcy proceedings.
While bankruptcy will lead to debt forgiveness, it can harm a business. This is because suppliers, prospective creditors and customers will know about the bankruptcy. This may reduce the fortunes of the business in the next foreseeable future. Therefore, it should only be used as the option of last resort.
A business has different types of assets, including; inventory, office equipment, plant and machinery among others. The lease and any goodwill are also considered assets that can be liquidated to pay off debts. This bankruptcy option allows the company or partnership to retain these assets. In return, the business makes monthly payments to clear its debts.
The first thing the judge will do after receiving a bankruptcy petition is appoint a trustee to supervise the entire process. After being appointed, the trustee will become a board member and the most powerful decision-maker. In fact, no important decision can sail through without the trustee giving approval. For instance, the management cannot hire new employees without the approval of the trustee. Furthermore, the trustee can cancel all overseas holidays for managers and fire non-essential employees.
During the bankruptcy process, assets cannot be disposed of. Buying of new assets will also be kept to the minimum. This will be the status quo throughout the bankruptcy process. It is important for business owners to keep this in mind when seeking to have their business declared bankrupt.
The moment a bankruptcy petition has been filed in court, the first thing the court will do is order the debtor to submit a plan on how they intend to service their debts. The plan must take into consideration all the overheads and monthly income. It is important to note that if a business has little to no income, this option will be taken off the table and liquidation recommended by the trustee. In such a case, the business will be wound up.
When writing the plan to repay business debts, the management of the firm will have to consider all the overheads as well as their projected income in the next couple of years. The plan must be reasonable and fair. It should take into consideration the average monthly revenue over the last couple of months. The plan will be presented to creditors by the management for approval. The court has the final say as far as approval of the plan goes.
It is important to note that creditors can take a legal entity to court and have it declared bankrupt to pave way for recovery of their debts. This is normally called involuntary bankruptcy. If successful, the accounts and assets of the business will be frozen to pave way for bankruptcy proceedings.
While bankruptcy will lead to debt forgiveness, it can harm a business. This is because suppliers, prospective creditors and customers will know about the bankruptcy. This may reduce the fortunes of the business in the next foreseeable future. Therefore, it should only be used as the option of last resort.
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