Bankruptcy among businesses in the Greater Houston area is rising rapidly. In March, 117 companies in the region petitioned for bankruptcy. This makes the Houston metro area the third highest in the nation for small business bankruptcy filings. Houston's bankruptcy rates have reportedly risen 40 percent since March 2010, while the rest of the nation has seen bankruptcy rates decline during this time.
Some attribute the high number of bankruptcy filings to the entrepreneurial nature of the people in the area. They speculate that the entrepreneurs in Houston are not afraid to take risks. However, in an ailing economy, many times those risks do not yield the desired results. Houston is known to be the home of thousands of businesses.
Those with an eye on the market say that many smaller businesses are unable to afford filing for typical Chapter 11 bankruptcy. Instead they find it better to file for a Chapter 7 bankruptcy. This type of bankruptcy liquidates all of the business's assets as quickly as possible in order to pay back lenders.
Chapter 11 bankruptcy on the other hand is geared toward reorganizing business debt rather than a straight liquidation. In this type of filing, a repayment plan is offered for the court's approval in which the petitioner would be required to repay the debts over a period of time, while remaining in business.
In Houston and elsewhere, the court will assign a trustee during a Chapter 7 case to be responsible for the liquidation process. It is the trustee's responsibility to marshal the filer's assets. Once accumulated, the trustee oversees their liquidation and sale, with the proceeds applied to outstanding debts in their order of priority as determined by the court.
Chapter 13 is another alternative form of personal bankruptcy. Checking with an attorney can help determine the best option for achieving the ultimate goal of debt relief.
Source: KUHF FM