You are the owner of a retail business, and you have fallen behind for many mont
ID: 426771 • Letter: Y
Question
You are the owner of a retail business, and you have fallen behind for many months on your loan repayments to the bank (you owe a total of $100,000). The bank has become fed up and now wants you to hand over all of your remaining company funds to pay back the loan. However, the holiday shopping season is coming up in a few months and this is where you typically do 60-70% of your business for the year. Without your company funds you will not be able to pay your rent and pay your staff, so you will not be able to pay back the bank until after the holiday season. If you end up needing to file for bankruptcy, what type do you think would be most appropriate for this situation – Chapter 7, Chapter 11, or Chapter 13?
Explanation / Answer
The most appropriate choice for the given circumstances would be Bankruptcy under Chapter 11.Chapter 11 is used by large businesses to reorganize their debts and continue their operation which seems to be suitable for the given circumstances since the person could make enough money in the holiday season to run the business and eventually pay his debts.Companiers are not allowed to file bankruptcy under chapter 13 and chapter 7 ,hence chapter 11 is the suitable choice for any business.
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