Sometimes businesses just fail. The debt can become overwhelming and creditors can begin exercising their rights for repossession of equipment (leased or financed), levies on bank accounts, and enforcement of personal guarantees against the business’ shareholders/members. An insolvent business has two bankruptcy options: Chapter 11 and Chapter 7.
Chapter 11 is a good option for businesses looking to restructure their debts under a plan of reorganization, while continuing to operate during that process. Chapter 7 is a good option for businesses who choose to close, liquidate their assets, and dissolve the corporate structure.