For businesses, bankruptcy is a way for debtors to eliminate any debts or to make it easier to repay those debts. There are two types of bankruptcies that companies can file for: Chapter 7 and Chapter 11. Chapter 7 bankruptcy allows a business owner to eliminate a majority of or all of the debt. Sole proprietorships mean that the business owner is personally liable for those debts, and Chapter 7 can work well in those situations. LLCs or corporations can also file for Chapter 7, but they will need to file on behalf of the company and require a lawyer. For Chapter 11, a debtor is allowed to restructure debts in a way that is approved by a bankruptcy court. It allows debtors to sell assets or downsize the business if necessary in order to make it easier to pay off all the debts.
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