No matter whether a business is a large corporation or a small business, bankruptcy is sometimes the only way to clear the dust and start building fresh.   However, what does that mean when your small business files for bankruptcy?  Are you still able to operate or are you forced to close your doors?  With headlines featuring Circuit City going out of business, small businesses question what happens when bankruptcy is the route to go. Here are basic facts about bankruptcy in regards to your business.

What Occurs to Your Small Business Credit Report

Before proceeding forth, you need to be aware that if your small business files bankruptcy it shall appear on your business credit report.  It will prevent your company from finding funds easily once the process starts.  You may not qualify for a small business loan and will need to look for alternative financing such as an unsecured business loan or a business cash advance.

The Differences between Chapter 7 and Chapter 11

There are distinctions between filling for a Chapter 7 or a Chapter 11 bankruptcy.  Thus, you need to think about which one is more suited for your situation.  With Chapter 7, a court-appointed trustee will begin sorting through your assets.  He/she will place your non-exempt assets for sale in order to pay back your creditors.  The problem with this option is it places your business at risk causing it to be difficult to stay in operations.  With Chapter 11 bankruptcy, you are able to continue operating daily business transactions.  However, under Chapter 11 you are legally forbidden to engage in any expansion or growth efforts.  It is part of the bankruptcy terms.

Filing bankruptcy should be the last resort for your small business.  Try generating further financing through business loans and business cash advance before turning to such drastic measures as bankruptcy and ruining your business credit permanently.

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