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When you are operating a business, there is always the possibility that it could collapse. While small businesses are more likely to fail than large ones, any amount of debt can cause problems in difficult economic times or when your company makes an error that puts its finances at risk. If the worst happens and your business fails, you might find yourself considering bankruptcy. The following list provides an overview of five types of business bankruptcy companies will consider filing for if they have no other alternatives.


1) Chapter 7 bankruptcy


Chapter 7 bankruptcy is the most typical type of business bankruptcy. In a Chapter 7 filing, you can expect to give up all of your company’s assets, and then any remaining debt that is left will be written off or “discharged” by a judge in a matter of only a few months if it is approved. This chapter of bankruptcy makes it one of the easiest ways to get out from under your debts within a relatively quick amount of time.


2) Chapter 11 bankruptcy


One type of Chapter 11 filing provides protection for businesses so that they have time to reorganize their finances before continuing with daily operations. If this route can help your business survive difficult times without having to shut down completely, it might be an option for your company.


3) Chapter 12 bankruptcy


This type of bankruptcy is only available to family farmers and fishermen. If you can show that you are actively engaged in such an operation, this chapter might provide the relief needed when your business cannot continue due to excessive debt.


4) Chapter 13 bankruptcy


Finally, Chapter 13 filing provides a way for businesses to repay some or all of their debts over a set period of time instead of having them discharged immediately or becoming part of a reorganization process under Chapter 11. The court must approve the repayment plan, and if it can be followed successfully, this option might save your business from failure.


5) Reorganization


The final bankruptcy option available to a business facing financial collapse is a formal reorganization, in which the company works with creditors and other interested parties to restructure its debts in a way that can make them more manageable. This process requires participation from all parties involved and will only succeed if there is sufficient support for such an effort.




Bankruptcy should not be entered into lightly, but sometimes this may be the only option left when you are facing serious financial problems. Understanding the different types of bankruptcy available to businesses can help you decide on what might work best for your particular situation. For assistance with sorting through and choosing between these and other options, consider speaking with an experienced business lawyer or bankruptcy attorney today.