When businesses are unable to pay their employees or pay their debts as they come due, they often turn to bankruptcy for some much-needed breathing room. As bankruptcy attorneys, we can best advise clients as to the legal advantages of the three bankruptcy alternatives: Chapter 7 bankruptcy, Chapter 11 bankruptcy, and assignment for the benefits of creditors, or ABC.
Chapter 7 bankruptcy
A Chapter 7 bankruptcy is a liquidation of debts and assets. This is often the only path for companies that have no real assets and are burdened with debt. An appointed trustee ensures secured assets are sold and the proceeds are paid to the creditors.
Chapter 11 bankruptcy
A Chapter 11 bankruptcy is often a reorganization of a company’s debts and assets. A Chapter 11 bankruptcy is more involved than Chapter 7 bankruptcy because it allows a company to reorganize its debt with the goal of possibly exiting Chapter 11 bankruptcy as a healthy organization. Together, we work with your creditors in an effort to change the terms on loans such as the interest rate and dollar value of payments.
Assignment for the benefits of creditors is an insolvency proceeding governed by state law rather than federal bankruptcy law. It is designed to save time and expense by liquidating through the appointment of an assignee, similar to a trustee in bankruptcy. This proceeding involves the voluntary transfer of all or most of a debtor’s property to the assignee who collects any money that is owed to the debtor, sells the debtor’s property, and applies the money received to the payment of debts.
SARDI LAW can assist you. To set up a consultation, email online or call our office at 305-697-8690.