There are two options that you can take into account when you are thinking of getting business bankruptcy protection. You could either go for a Chapter 7 bankruptcy or for a Chapter 11 bankruptcy. In Chapter 7 filing, you will have the federal court that presides over your petitioning appoint a trustee who for all intents and purposes becomes the temporary owner of your assets and your business. With this type of business bankruptcy, you would not have a hand in the business operation because it will be the trustee who would be choosing who to hire, who to fire, how to utilize the business assets to pay off creditors, how to structure the business for the benefit of every shareholder, and many more. Chapter 7 business bankruptcy filing may be your best option (or even your only viable option), depending on your circumstances. Chapter 7 exists for your protection and that of your creditors. However, some businesses facing bankruptcy may find it more attractive to file for Chapter 11 protection.

By filing a Chapter 11 business bankruptcy, you get to maintain control and command over business assets, as well as the business operations. In this type of bankruptcy, the court states that your management team will be regarded as “debtor-in possession”, otherwise known as DIP. The DIP acts like an agent, one who works out a deal with your business creditors, with regards to payment terms that are agreeable to both parties. The payment plans could be in the form of regular partial payments to the creditor, until the time that the debt is fully satisfied. There are also creditors who would agree to a much lesser amount than what is really due them, and who are willing to cease legal collection attempts in lieu of the payment. The DIP functions in the capacity of a court appointed trustee, except that it comes from within your own organization and no-one is appointed by the court. The DIP is going to have the business' best interests in mind, whereas a court appointed trustee cares more about paying off creditors.

While Chapter 7 business bankruptcy dwells more on liquidation, Chapter 11 is mainly about restructuring. This means that the operations and composition of your business get altered around so that debts can be paid in a timely manner while the business continues to operate and grow. You may need to temporarily, or completely, lay off workers, perhaps even excise entire departments. The DIP will oversee this process so that whatever caused the gross inefficiencies in spending that made it so that you could not pay your creditors in a timely manner is removed from or utterly changed within your business. The federal court overseeing your Chapter 11 filing will have you and your creditors regularly report on the progress of activity.

In the event that some or all of your creditors remain unhappy with the actions of your DIP, they can petition the court to change the DIP with its own appointed agent. This surely is not to the benefit of your business. Because of this, it is just proper for you to seek the services of an attorney who has the expertise in business bankruptcy law if you are thinking of filing for Chapter 11. He will be regarded as a "Debt Relief Agent”. He will be able to guide your DIP and negotiate with creditors so that your business bankruptcy filing does not turn into the destruction of your business.

If you see that business bankruptcy protection is already required by your business, it is best that you seek out the help of an experienced bankruptcy lawyer who could give you the right advice with regards to the filing option that would be suitable for your business. Just the same, there is a possibility that you might find another solution aside from filing for bankruptcy. Filing for business bankruptcy should be regarded as a last resort when looking for ways to save your business.

Are you considering filing business bankruptcy? If you have questions, you should speak with a reputable and experienced chapter 11 bankruptcy lawyer, as well as consider all other options before choosing what makes sense for your organization.