Bankruptcy Indiana

In addition to heading an office of Columbus bankruptcy lawyers, I'm a bankruptcy attorney and debt consolidation lawyer in Indianapolis, Anderson, and Bloomington, serving 38 counties in our state.  I've had a lot of experience offering small business bankruptcy services in Indiana, and needless to say, during this recession, there have been many more than usual small businesses needing Indiana bankruptcy help.
 
My experience has taught me that personal and business matters are intertwined for most small business owners.  Besides the business-related financial problems, such as slow-paying customers, squeeze from suppliers, difficulty in obtaining or renewing credit, downturn in the industry, and all the other typical business problems, business owners have  the same individual problems that face their friends and relatives. 

Some business owners, for example, need student loan debt help, either on their own behalf or on behalf of their children. Some are going through a divorce along with the business challenges. For all those reasons, it often happens that in offering Indiana bankruptcy help to the  individuals who own the business, at all  the Mark Zuckerberg bankruptcy law offices, we ended up helping those same individuals file personal bankruptcy in Indiana, either along with, or in place of, small business bankruptcy. 

Generally speaking, in the past year, U.S. consumers and businesses filed bankruptcy at a pace that made 2009 one of the worst years on record, with more than 1.4 million petitions submitted nationally. The bankruptcy lawyers in  the Columbus tell me they're seeing an increase in business/personal combined bankruptcy filings as well.

In the national bankruptcy statistics, remember, the business and personal bankruptcies show up as separate cases. But what I need to add in providing Indiana bankruptcy information is what the statistics don't reveal , which is the great extent to which personal bankruptcy is combined with small business bankruptcy in Indiana.

It is definitely true (as I often find myself explaining in answer to bankruptcy blog readers' questions), if a small business is held in the form of a corporation, partnership, or LLC, the business is a separate legal entity and CAN file bankruptcy in its own right, without the owners themselves filing bankruptcy. However, that often isn't the way things actually happen.

In either event, whether a small business bankruptcy is filed with no personal bankruptcy or in combination with a personal case, there are essentially two types of bankruptcy that a small business can use when it needs Indiana bankruptcy help:

Chapter 7:

Chapter 7 is a liquidation bankruptcy, but it is different from a liquidation bankruptcy filed by an individual, in that businesses don't get their debts discharged.  Chapter 7 provides for an orderly liquidation of the business under the direction of a bankruptcy trustee.  The advantage is that shareholders have no costs, and collection efforts are halted through the Automatic Stay.

Chapter 11:

Chapter 11 bankruptcy is meant for a business that is suffering severe financial difficulties, but where there is a good possibility for that business to survive if its debt repayments can be reduced or postponed. What is different about this kind of Indiana bankruptcy is that the debtor (the business) remains in control as a "debtor in possession", becoming a "fiduciary" for the creditors.  A special committee of unsecured creditors is formed to supervise the process along with the owner.

Because Chapter 11 is an ongoing process, the owners of the business are going to need to devote a lot of time and effort to the extensive financial reports that need to be turned into the Indiana bankruptcy court during the "rehabilitation" period, all the while dealing with the day-to-day challenges of running the business. The reporting may require additional professional consultants and accountants, which adds to the financial burdens that are already causing problems.  

In essence, Chapter 7 bankruptcy is an ending process. Chapter 11 is a continuing process that buys time to consider future direction.

So, which is "better" for a small business - Chapter 7, or Chapter 11?

One thing for sure: No matter what form it takes, bankruptcy is a very bitter pill for any business owner to swallow. My job in offering bankruptcy services in Indiana is to help each business owner evaluate all available options and make the decision that best fits that situation.  I wish I could give a one-size-fits-all answer, but I can't. I dedicate my efforts to offering Indiana bankruptcy help.  But, when it comes to selecting which type of bankruptcy - Chapter 7 or Chapter 11 -  is going to provide the most help, the onl;y answer is - IT DEPENDS!