A chapter 7 liquidation may be what a business needs to stop the bleeding of a collapsing business and have an orderly shut down. It’s never easy to admit that its over, but a Chapter 7 case can allow a business to close down with a Trustee taking care of the details and the principals walking away.

A Chapter 11 reorganization allows a business to restructure its debt to eliminate costly leases, rework unfavorable contracts and take an overburdened business back from the brink. Different rules apply depending on whether the business qualifies as a small business, so a consultation with an experienced Chapter 11 attorney is critical before jumping in.

An assignment for the benefit of creditors is a state court action (as opposed to a business bankruptcy, which is federal) designed to close down a business and maximize returns to creditors. It is a powerful tool with some wider powers than a bankruptcy. It can insulate principals from liability and may be able to realize a greater value from an insolvent business than a Chapter 7 bankruptcy.