Filing for bankruptcy is the best way to save a life from huge debts that are overburdened. However, often people confuse Chapters, 7, 11, and 13 while filing for bankruptcy. If you are planning to file in the Virginia court under Chapter 7, then you also need to know a few things about Chapter 11 to decide better.
Contact the Virginia bankruptcy law firm of John W. Lee, P.C. with multiple office locations throughout Hampton Roads. Our staff of lawyers have a combined 70 years of experience in legal matters. They can easily guide you on filing for a Virginia Chapter 7 bankruptcy and Chapter 11. They can also help you in filing for bankruptcy in the most seamless way.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is also described as “Liquidation” bankruptcy. Businesses facing this type of bankruptcy have passed the reorganization stage and must sell assets to pay creditors. The bankruptcy court might appoint a trustee to ensure that creditors are paid in the proper sequence, according to the “absolute priority” rules.
In a bankruptcy, secured debt takes precedence over unsecured debt and is the first to be paid off. Secured debt refers to loans made by banks or other financial institutions that are secured by a specific asset, such as a building or a piece of expensive machinery. Individuals who qualify for Chapter 7 bankruptcy are a firm, small business, or personal. People may also qualify for Chapter 13, a type of bankruptcy in which they agree to return a portion of their debts over a 3-5 year period while under Virginia judicial supervision.
Chapter 11 Bankruptcy
Another name for Chapter 11 bankruptcy is “Reorganization” or “rehabilitation”. It’s the most complicated type of bankruptcy, and it’s also the most expensive. As a result, businesses, such as enterprises, partnerships, joint ventures, and liability corporations, are more likely to use it than individuals (LLCs).
Unlike Chapter 7, Chapter 11 allows a company to rearrange its debt to reappear as a healthy company. The filing of a petition in a bankruptcy court is the first step in a Chapter 11 lawsuit. The petition can be either voluntary (submitted by someone) or involuntary (filed by creditors who require their money). During Chapter 11 bankruptcy, a company can continue to operate while taking steps to improve its financial situation, such as lowering costs, selling off assets, and attempting to renegotiate obligations with creditors—all under the supervision of the court.
The nomination of a trustee is required in Chapter 11, just like in Chapter 7. Rather than selling off all assets to satisfy creditors, the trustee controls the soul’s assets and allows business to continue. If a company is doing well in Chapter 11, it’ll most likely be expected to continue operating cost-effectively with its new structured debt. If the business isn’t thriving, the company will file for Chapter 7 bankruptcy and liquidate.