Which types of bankruptcy protection are available for businesses?

Chapter 7 and Chapter 11 are commonly available types of bankruptcy protection for businesses, each serving different purposes in the bankruptcy process.

Chapter 7 bankruptcy is known as liquidation bankruptcy. It allows for the winding down of a business's operations by selling off its assets to pay creditors. This process often results in the business ceasing operations, making it suitable for businesses that are unable to continue due to insolvency. The business is liquidated and any remaining debts are discharged, allowing the owner or owners to walk away from the remaining liabilities after the liquidation process is complete.

Chapter 11 bankruptcy, on the other hand, is a reorganization bankruptcy. It permits businesses to continue operations while restructuring their debts under court supervision. This is often seen as a more favorable option for businesses looking to recover and maintain their operations while trying to negotiate a plan to repay creditors over time. Chapter 11 allows businesses to keep their assets and continue functioning, which can lead to a more successful turnaround compared to liquidating assets under Chapter 7.

The other options do not accurately represent the types of bankruptcy available specifically for businesses. For instance, Chapter 13 is typically available for individuals with regular income and is not designed for businesses. Chapter 12 is specifically for family farmers or