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  Business bankruptcy is available in three different varieties: liquidation, reorganization and debt adjustment. There is no universal bankruptcy that works best in each situation. Instead, the business must evaluate its options and potential outcomes under all three chapters, and then choose the chapter that best accomplishes the business's goals and objectives. As a preliminary matter, all businesses must hire an attorney to represent them in the bankruptcy procedure. The attorney will help the business decide which chapter is most appropriate.
  
  

Chapter 7 Liquidation

• Chapter 7 liquidation is the most desperate form of bankruptcy because the business will no longer exist at the end of Chapter 7. Liquidation means the bankruptcy trustee will sell all of the business property and assets. The trustee then uses the money earned from the property sales to pay off as many of the business's creditors as possible. If some creditors don't get paid, those debts are discharged, which means they are no longer legally enforceable. After all of the property gets sold, the business ceases to exist as a legal entity.
  
  

Chapter 11 Reorganization

• If the business wants to remain operational after bankruptcy, then the business should file Chapter 11 or 13 instead of Chapter 7. Under Chapter 11, the business must create a business reorganization plan that convinces the bankruptcy court that the business can operate under a new business model and create a profit. Creating a persuasive, reasonable reorganization plan is no small feat; in fact, the creation of such a plan often requires the help of expensive accounting and legal professionals, and total costs can easily reach $100,000 or more. If the bankruptcy court approves the reorganization plan then the business will continue to operate, albeit under a new business model, and the business will have some time to pay off its existing debts.
  
  

Chapter 13 Repayment

• Chapter 13 is the least cumbersome of the three bankruptcy options available to businesses. Under Chapter 13, the business will create a debt adjustment and repayment plan. First, this plan will list out each of the business's debts. Next, the plan will show how the business intends to create revenue to pay down business debts. Finally, the plan will propose a debt repayment plan that shows how each debt will get paid off. Most often, the plan will provide for debt repayment in a reduced amount and over an extended period of time. As long as the bankruptcy court approves the plan, creditors are stuck with payment under that plan. After approval of the plan the business will make one monthly payment to the bankruptcy court and then the bankruptcy court pays the individual creditors.