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How to use bankruptcy filing to rescue a business in trouble

November 30, 2005View for printing

Bankruptcy laws favor the debtor, offering a chance to wipe the slate clean and start over by providing protection from creditors and an opportunity to make and implement a reorganization.

Timing is key: You should try to file for bankruptcy before creditors take you to court and force your hand. But think long and hard about the process, which can be lengthy and stressful. Once you file for Chapter 11, you will have court protection and creditors will be kept at bay, allowing you time -- typically 120 days by court order -- to come up with a reorganization plan. The court can extend the plan, but not more than 18 months beyond the original filing.

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