Corporate bankruptcy or business bankruptcy in Chicago is a legal move that is made by the business when it is no longer in a position to meet its debt obligations and seeks protection from legal action that can be taken by the creditors. There are two types of business bankruptcy that can be declared; Chapter 7 and Chapter 11. Any business can file under either of these Chapters regardless of whether it is a single proprietorship or a corporation.
Chapter 7 is a form of business bankruptcy in Chicago that is used when the business wishes to seek trading and liquidate all the assets. The company is signed over to a bankruptcy lawyer who in turn takes full responsibility for shutting the company down, disposing of all the assets and parceling out the residual between the creditors of record.
Chapter 11 on the other hand allows the business to continue in operation while an attempt is made to reorganize under the guidance of the court. In Chapter 11 the bankruptcy court can grant full or partial relief from debt and contractual obligations. The objective is to reorganize in such a way that they can emerge from bankruptcy healthy and able to keep in business.
Under bankruptcy law the court can set aside binding contracts; these can be real estate leases, purchasing and supply contracts and union agreements. This solution is often used by large corporations who are in cash default and as a result cannot reorganize due to the burden of these obligations. There are many things that can trigger a business bankruptcy in Chicago; poor sales, ever increasing operating expenses or simply a poor business climate.
In either Chapter 7 or 11 bankruptcies all legal proceedings against the company stop, this gives the business time to settle its debts and reorganize. In Chapter 11 the company can come up with a reorganization plan proposal, if the plans are acceptable by the majority of the creditors as well as the court, the plan will be imposed on the company. If an acceptable plan cannot be agreed the company either reverts to Chapter 7 or goes back to normal operations. If the company does return to normal operations any all legal actions can resume. In most cases if the company cannot obtain finance quickly it slides back to bankruptcy.
There are two different types of creditors in a business bankruptcy in Chicago; secured and unsecured. Secured creditors have priority as their debt was supported by an asset. The highest ranked secured creditors are the company’s employees.
A business bankruptcy in Chicago can be very complicated, especially if the creditors allow a reorganization plan which is acceptable under Chapter 11. You will need legal assistance in developing a plan that will allow you to remain in business, you are welcome to contact Chicago Debt Solutions by the Law Offices of Trepeck Law Group, LLC.