Bankruptcy Law Questions? Ask a Bankruptcy Lawyer Now.
1) Is it your intention to close the business, or to keep it open?
2) Does the business have significant assets that can be sold?
First you should know that debts cannot be discharged in a business Bankruptcy. The 2 business Bankruptcy options are "liquidation" - where the business assets are sold and the business usually closes - and "re-organization, where creditors agree to take less as payment in full for what is owed, and they agree to allow the business to pay them over time - up to a few years.
When creditors agree to take less, they look at what they can get otherwise - which is the total value of the business assets.
In this situation, Bankruptcy is beneficial to a business only if the total debts are significantly greater than total assets.
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So if total asset value is $100,000, what debt value would make bankruptcy an option. $125,000, $150,000, $175,000 ? What is a ballpark amount that could be expected for attorney fees for the bankruptcy process.
It seems that if the point of bankruptcy were to be freed of burdensome debts, wouldn't liquidation almost always make the most sense. If the entity wanted to continue it could purchase the needed assets at liquidation ( I assume auction) and start fresh with a new corporate entity ?
1) Any one of those figures ($125K - $175K) would make Bankrutpcy a viable option for your creditors, if your total assets could bring in only $100K.
2) If the entity has assets available to purchase the "needed assets at liquidation", those assets would also become part of the Bankruptcy estate, so could not be used to purchase the needed assets.