Individual Bankruptcy

In: Business and Management

Submitted By timali926
Words 388
Pages 2
Chapter 11 bankruptcy allows a business to remain in operation while reorganizing its structure and debt. According to the Fried Law Firm, unlike a chapter 7 bankruptcy, which requires total liquidation and a cease in business activities, the company can continue normal operations. In addition, the company in all likelihood will be able to continue paying employee salaries, pensions, and health benefits. Chapter 7 bankruptcy is sometimes also called liquidation bankruptcy. Firms experiencing this form of bankruptcy are past the stage of reorganization and must sell off any un-exempt assets to pay creditors. In chapter 7, the creditors collect their debts according to how they loaned out the money to the firm .A trustee is appointed who ensures that any assets that are secured are sold and that the proceeds are paid to the specific creditors. Chapter 11 is much more involved than Chapter 7 bankruptcy as it enables the firm to reorganize its debt and to try to re-emerge as a healthy organization. An advantage of Chapter 11, if one is able to meet all of the statutory requirements, is that there is no set limit on a plan's duration. Chapter 11 plans often provide for debtors to make payments to creditors over a period of three to five years. The bankruptcy court can confirm a Chapter 11 plan with a longer term, however, if one requires more time to make required payments. A typical Chapter 7 bankruptcy case is opened and closed within three to six months, and the person filing emerges debt-free except for a mortgage, car payments, and certain other types of debts.
The CPA's role in bankruptcy proceedings depends on which party he or she represents. Most cases that call for the services of a CPA involve businesses. In some Chapter 11 cases and in all Chapter 7 cases the Bankruptcy Court appoints a trustee, who may hire his or her own CPA. In Chapter 11 cases, an…...

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