ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Bankruptcy Filings in American Law

Updated on December 21, 2017

Filing for Bankruptcy

A business is an enterprise that is run individually or in conjunction with others to trade or manufacture and then generate a profit. A business is also a company or an organization that also does sale, manufacture, and trade in goods or services. All these, when they run into financial trouble and are unable to pay their creditors, can be referred to as Bankruptcy business. Federal bankruptcy laws lay down the ground rules of those companies that go out of business or face insurmountable debt

It’s worth noting that Corporations, limited liability companies, and partnerships are legal entities. They are separate from shareholders or partners. Such entities can file a chapter 7 or chapter 11 bankruptcies directly.

Filing under Chapter 11

A bankrupt company or bankrupt business is a debtor. Such a bankrupt business can file under chapter 11 of the law with a view to reorganize its business and try and generate a profit again. K Mart, Enron, World com are some of the big names who have filed for bankruptcy under chapter 11. For bankruptcy business to file under chapter 11 the need of a lawyer is essential as chapter 11 bankruptcy is fairly complicated.

Proprietorships companies are ownership companies. In their cases, the proprietor must file bankruptcy, since the assets and the liabilities of the business are really belonging to the proprietor himself. The individual owner may file Chapter 7, Chapter 11 or 13 business bankruptcies. A problem that an owner of a bankruptcy business faces is whether to close business or start afresh after filing.


To such a question answers don’t come easily. Remember reorganization of a business can’t generate a market or increase revenue. However, reorganization can free up cash from servicing the old debt to permit current operations. In between Chapter 7 and Chapter 13, there is Chapter 11 that can provide a breathing space for the owners to sell the business as a going concern or its assets.

The results from this reorganization can help pay taxes or unpaid salaries. The bankruptcy can also then be converted to Chapter 7 or dismissed if bankruptcy protection is no longer needed. The court will link the dismissal of the case to payment to creditors from the sale proceeds. Bankruptcy reorganization when carried out under the aegis of Chapter 11 requires significant time and effort on the part of the owners and managers.

This is a difficult chapter and the requirements of interface with counsel, and negotiate with creditors is very important. It could also cost a pile of money. The court could accept a plea that, in exchange for the protection of the automatic stay the debtor provides will provide full disclosure of its financial condition to creditors and the court as well as operates as a fiduciary (trustee) for its creditors while the bankruptcy is ongoing. Entities that try reorganizations can fail. This is usually because they have no real plan to solve the existing problem. Businesses that do not require large capital and are really just an extension of the owner’s skills are the ones that it doesn’t need to reorganize.

For such bankruptcy business, the owners would be better advised to liquidate their business and starting all over again. Chapter 7, whether for the individual or a corporation, may be the best choice when the business has no future and there are no large assets or the debts are so large that restructuring the business would have no meaning.

Last Word

Individuals can get a reprieve from all debts that can be discharged and they also have a chance to restart again. A point to be noted is that Corporations differ from individuals and don't get discharges similar to individuals. Yet the fact is that a Bankruptcy under chapter 7 can be a help in an orderly manner and the trustee can exercise his power, which is available to the filer at no cost. To him. Creditors in Bankruptcy business proceedings have an assurance that they will be paid from the assets that are available. Payments will be as per the priority accepted.

The earlier management has an assurance that the assets the assets that are available will be used to clear payment of taxes towards payment of taxes which are the responsibility of the concerned individual


    0 of 8192 characters used
    Post Comment

    No comments yet.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)