Businesses, companies, and firms can file for bankruptcy if they are on the verge of failing all their creditors and losing their position in the market. The laws that deal with such cases are federal bankruptcy laws or Chapter 11 and Chapter 13 laws.
One advantage of filing under federal bankruptcy law instead of under Chapter 7 is that this does not require the liquidating of the company. Instead, the company will be run along with the debt being paid as decided, which will give the firm or company a chance to try to make profits again. However, all the decisions made by the management after the case is files must be approved by the federal court.
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In case the company files for bankruptcy under Chapter 11, all the assets remain with the company. The company may liquidate stocks and such to pay off some part of the credit but this can be solely at the company's discretion. However, regular reports must be sent to the court as to any decision being made in the company.
Cases filed under this law are usually very expensive and take a long time to resolve since they deal with a number of people involved in the company instead of with just one individual as in other cases. Even the filing fee for such cases is very expensive. The management must be in a position to incur all such costs when filing the case. Also, a lot of planning must be done before filing the case to avoid too many delays later in the case.
The company can form a committee of creditors to come up with a plan to repay their debts. This involves simultaneously running the company and incurring new expenses and following a court-approved plan to pay off the debt. It is suggested to have attorneys in the committee to avoid litigations in the future relating to this plan.
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