Obtaining credit through a state law assignment for the benefit of creditors or reorganizing under Chapter 11 bankruptcy may be the best option for your business. This process is faster and less expensive, and the debtor will be able to retain most assets while minimizing liability.
What happens if I file bankruptcy?
A business may need to file bankruptcy because of a financial crisis, or the business may have significant assets that are in dispute. When a business is in bankruptcy, its assets and liabilities are reorganized to ensure that creditors receive a fair return on their claims. When a business is reorganized under Chapter 11, its creditors are treated fairly and given a priority on their payments. Source : https://www.scura.com/blog/nj-assignment-for-the-benefit-of-creditors-or-business-bankruptcy
A business in bankruptcy may be able to continue operations while its case is pending. However, the debtor must follow special time limits on certain contracts and leases. The debtor may also reacquire property from creditors.
Depending on the circumstances, creditors may choose to accept ownership of the new company in exchange for payment on their claims. In other situations, creditors may seek to bring litigation against the estate to void contracts and recover property.
A business can ask the court for authority to pay wages and benefits, file taxes, or pay contractual obligations. It can also request to continue using property in the business’s normal course of operations. However, it is important to note that the use of cash collateral without permission from the court is prohibited.