Everything You Need to Know About Business Bankruptcy
Bankruptcy is a legal process which a business goes through when it cannot pay its debts. The bankruptcy process usually begins when the business owner realizes that there is not enough money for payroll or to pay the bank loan or other loans or obligations. There may not be enough customers or clients to offset the fixed expenses of the business. In many cases, the business has already cut back, letting employees go, minimizing expenses, and the owner has stopped taking money from the business, if possible.
Bankruptcy doesn't mean that the company must cease operation. In many cases, the business can continue to operate under Chapter 11-Reorganization, with a court-appointed bankruptcy trustee. Only in the most extreme cases, where there is no hope that the business can be salvaged, does a Chapter 7 bankruptcy occur. In a Chapter 7 bankruptcy, the business are liquidated (sold) and the proceeds are used to pay off the creditors.
