If your business is struggling financially and you are trying as hard as you can to get out from under overwhelming debt but just can’t seem to prevent your business from going under, bankruptcy may be your best option. Before you start the process to declare bankruptcy and help to get your business back on its feet, you must understand exactly what bankruptcy involves in Montana.
Bankruptcy originates from the federal government but there are some minor differences among the states in the nation. By definition, bankruptcy is a group of laws and regulations that assist people and businesses who are more deeply in debt than they are able to pay.
There are 94 federal judicial districts and they all deal with matters concerning bankruptcy. In most cases, bankruptcy cases are filed with the bankruptcy court. The bankruptcy laws were created to help people who cannot pay their creditors and who can have a new beginning by either liquidating assets or starting a repayment plan.
How can bankruptcy help my business?
Bankruptcy laws can protect businesses that are in financial trouble.
The main purposes of bankruptcy laws are:
- To allow the debtor to start over by removing most of the debt from the debtor
- To pay back creditors in an organized way to the point where the debtor has property available that can be used to pay back the creditors.
Generally, businesses file for one of two types of bankruptcy known by their chapters under the U.S. Bankruptcy Code. Businesses generally choose Chapter 7 bankruptcy when they are seeking to shut down operations and liquidate the business. They choose Chapter 11 when they seek to reorganize their debts to get in better financial shape.
What are the steps in the bankruptcy process?
There are several steps to the bankruptcy process and understanding those steps before you go through to process will probably be extremely valuable.
- The debtor files a petition with the bankruptcy court: A petition can be filed by one person, by a couple or by a corporation or other entity. Additionally, the debtor is responsible for filing a statement that contains a list of assets, income, liabilities and the names and addresses of all of the creditors and the amount of money that the debtor owes them. As soon as the petition is filed, the creditors’ ability to collect the debt is on hold. That is known as a stay and as long as the stay is in effect, the creditors are not allowed to go after the debtor’s assets.
- Creditors receive written notice that the papers were filed by the debtor: Once the papers have been filed by the debtor, the creditors will be notified by the court clerk. Depending on the specific situation, some bankruptcy cases allow the debtor to reorganize and establish a plan to pay back the creditors and other cases involve the debtor liquidating their property. In cases of liquidation, it is not uncommon that after the property is liquidated, there will be some money to pay back the creditors. In those cases, the creditor will have to be satisfied with whatever the debtor paid them and the rest will be forgiven. In those cases, there will not usually be any disputes or disagreements.
However, in other cases, there will be disagreements between the debtor and the creditor and that may lead to litigation. Some reasons for disagreement may be who is the owner of certain property, how that property should be used, the value of the property, how much money is still left on the debt, whether the debt should be forgiven, how much the lawyers should be paid, as well as debts to other professionals who are involved with the case.
Solid legal advice from a Montana bankruptcy attorney
If your business is drowning in debt and needs to go through the process of declaring bankruptcy, the experienced counsel of a Montana bankruptcy attorney may prove to be extremely valuable to your case. It is difficult enough to know that bankruptcy is your best option. Aside from the financial difficulties that go with that, the situation also touches on a lot of emotions that you must deal with. The solid advice of a knowledgeable attorney can help you to go through the process successfully while protecting your rights so that you can start over and get back on your feet in the near future.