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Determining which type of bankruptcy is best for debt relief

Facing financial devastation in a private or professional capacity is an intensely personal, often stressful situation. There are many reasons that a company may find it necessary to declare bankruptcy. Determining which type of debt relief best suits a particular Washington business may be difficult and is often best addressed alongside skilled legal counsel.

The two most common forms of business bankruptcy filed are Chapter 7 and Chapter 11. The first typically requires a complete liquidation of assets. The latter is designed as more of a restructuring option, often allowing the person/business filing to retain possession of assets while scheduled payments are made to debtors in an effort to reorganize and restore financial stability.

Some say forcing a company to liquidate all assets often has an adverse effect on the economy as a whole. It may be better to formulate a plan where the company can stay open for business while proactively restructuring finances and paying off debts. Every situation is different, and much depends on the current market of the established business.

In certain circumstances, Chapter 11 bankruptcy may be filed and later converted by a judge to a Chapter 7. One school of thought suggests that it may prove difficult to find buyers for companies sitting vacant due to Chapter 7 statuses. Those in Chapter 11 seem to attract buyers more easily because they can continue to function throughout the debt relief process. An experienced attorney would be able to provide effective counsel to any Washington business person in need of such guidance.

Source: insight.kellogg.northwestern.edu, "Chapter 7 vs. Chapter 11: Which Bankruptcy System Is Best?", Roberta Kwok, July 5, 2016

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