How will filing for bankruptcy affect a business?
The consequences of filing for bankruptcy will have different affects on a business. First and foremost, whether the company is eligible for a liquidation and discharge of eligible debts will depend on whether it is a sole proprietorship or a corporation. Corporations cannot file a Chapter 7 liquidation and must instead seek debt reorganization under Chapter 13 or Chapter 11 of the bankruptcy code. In some cases, the company can continue to operate as it repays its debts under a specific repayment plan. In other extreme situations, the business may be forced to close its doors.
