Business Loans and Bankruptcy

Filing for bankruptcy protection should never be a source of shame. Many companies go through a rough patch. Indeed, Business Insider reports that approximately 20,000 U.S. companies file for bankruptcy protection every year. 

In some cases, a bankruptcy filing is the most effective way to wind down a financially distressed business. In other cases, bankruptcy may save a business. Here, our business bankruptcy attorneys provide a guide to commercial loans and the bankruptcy process. 

Treatment of Business Loans in Commercial Bankruptcy 

How exactly business loans will be treated in bankruptcy depends on a number of different factors. There are two primary types of commercial bankruptcy: Chapter 7 (liquidation) and Chapter 11 (reorganization). With a Chapter 7 bankruptcy, the company will cease operations and go out of business, and tis assets will be sold for the benefit of its creditors. With Chapter 11 bankruptcy, debts will be restructured to allow the company to get back in stable financial shape with payments to creditors often being made from the revenues of future operations. Whether a petitioner is filing for Chapter 7 or Chapter 11 will affect how debts, including commercial loans, are treated. 

Beyond the type of bankruptcy filing, the treatment of business loans will also depend on the specific terms of the lending arrangement. An unsecured business loan will receive only a small recovery of its loan in many cases. In contrast, a secured business loan—which is backed by collateral— will provide a creditor with a better position to recover its debt. If you have questions about your business loan and commercial bankruptcy, an experienced bankruptcy attorney can help. 

Coming Out the Other Side: What to Know About Business Loans After Bankruptcy

When a company files for Chapter 11 bankruptcy protection, the ultimate goal is to come out the other side of the process in better financial shape than it began. One of the challenges that many business owners worry about is trying to access financing after a bankruptcy filing. To be clear, it is still possible to get a business loan after filing for bankruptcy. A prior bankruptcy filing is not a legal bar to obtaining a commercial loan. 

Contact Our Business Bankruptcy Attorney for Immediate Help With Your Case

At Pierce/McCoy, our top-rated business bankruptcy lawyers are skilled, sophisticated advocates for clients. We believe that your company deserves the highest level of professional service. If you have questions about business loans and bankruptcy, our legal team can help. For a confidential, no commitment case evaluation, please contact us now. We handle commercial bankruptcy cases in New York, Virginia, and Texas.