Posted on: 30 October 2019
Bankruptcy is a big deal, whether you're a struggling head-of-household or a high-flying entrepreneur. The specific type of bankruptcy chosen can mean the difference between financial restoration or disarray, though, especially when it comes to a business filing. As a small business owner, you know you have to make some tough choices now, just as you've done all along.
Whether your business can survive or not is a major deciding factor for you, but so is your personal financial future. With so much on the line, each decision you make has a major impact; thus, your success or failure pivots on the legal guidance you solicit, right now.
1. File for Chapter 7 if the Business Can't Be Saved
If your business is drowning in debt with no foreseeable relief, it may be best to file under Chapter 7, although you won't be able to do so if your business involves a partnership or you have formed any type of corporation.
Chapter 7 would allow for the dissolution of the business completely, with assets distributed to creditors, followed by a complete discharge of your financial obligations. As simple as it sounds, you'd still be required to work with the courts and a trustee, along with tidying-up loose ends, which makes it wise to hire a bankruptcy attorney before even making a decision as to which Chapter to file.
2. Reorganize Under Chapter 11 When There's Hope for the Business
If you have good reason to believe your business can survive this rough period, a reorganization, including of your debt, is likely a viable option. Chapter 11 would mean working closely with your creditors, who'd have a say in the reorganization plan, and a court-appointed trustee, who'd oversee the plan through its duration.
Under Chapter 11, you can restructure debt, refinance and reorganize your entire business plan to suit the bankruptcy, which allows you to continue operations while meeting your accrued financial obligations. Chapter 11 is more complicated and involves a lengthy plan, which is best met head-on and with a bankruptcy law firm that's "been there and done that" a few times or more.
3. Understand Sole Proprietorship and Chapter 13 Bankruptcy
As the sole proprietor of a business, you may have the option of filing for a personal bankruptcy, without fear of losing personal assets such as your home and vehicle. Chapter 13 calls for an in-depth analysis of your debt and income, after which, you'd make agreed upon payments until the debts are paid off. If you have a steady income separate from your business, like from a full-time job, that money would factor into your debt repayment program.
The difference between Chapters 7 and 13 is primarily your ability to repay; if you can't, then Chapter 7 is a better course to follow, but if you can, 13 may be the way to go. Either way, though, it's imperative to seek the guidance of a qualified bankruptcy lawyer to navigate your way out of the financial turmoil.
Working through your choices with with a bankruptcy law firm is a good to move forward, from a personal and business perspective. Contact local law firms to learn more about your options.Share