Business owners, depending on their business’s structure, can apply for Chapter 7, Chapter 11, or Chapter 13 bankruptcy. Each form of bankruptcy has its own set of benefits and weaknesses, and these benefits and weaknesses also depend on the owner’s business. Because there are so many variables when it comes to business debt, you should seek out the help of a bankruptcy attorney before choosing whether bankruptcy is right for your business.
Chapter 7 Bankruptcy for Sole Proprietorship
Though individuals, not businesses, commonly file Chapter 7 bankruptcy, a bankruptcy attorney could suggest this option. A Chapter 7 helps erase all personal unsecured debt. This can help you only if you have a sole proprietorship business. In a sole proprietorship, the court sees no difference between personal and business profit and assets. A bankruptcy attorney might suggest Chapter 7 if you are incapable of paying your business debts from your own pocket. You might find it difficult to keep your business running after the bankruptcy, however, because your business assets will be made available to your creditors unless you and your bankruptcy lawyer can find a way to exempt them.
Chapter 7 Bankruptcy for LLCs and Partnerships
LLC and Partnership businesses typically use Chapter 7 when they want a trustee to sell off their assets in a transparent manner. In many cases, filing Chapter 7 can actually hurt the owners of an LLC or a Partnership by making their personal assets available to creditors. A bankruptcy lawyer can assess the issues of your unique situations and help you determine the best course of action.
Chapter 11 Bankruptcy for All Business Structures
Filing Chapter 11 bankruptcy typically costs more bankruptcy attorney fees, but it is often the most flexible option if you can afford it. Chapter 11 works best for businesses that have hit a minor road block but that can realistically bounce back. The flexibility allows your business to stay open during the process and potentially thrive afterward. This is a high risk and high reward bankruptcy option that is beyond the reach of some sole proprietorship businesses.
Chapter 13 Bankruptcy for Sole Proprietorship
Only a sole proprietorship business can file a Chapter 13 bankruptcy. This type of bankruptcy allows you to restructure your business’s debts. If you helped keep your business afloat with your personal income, then filing a Chapter 13 can also help you restructure your own debt. The court, trustee, and creditors will come up with a repayment plan, and you might find yourself paying less than your original debts. If your business owes too much, however, you will be forced to file a Chapter 11 instead.
Contact a Small-Business Bankruptcy Attorney Today
At Groce & DeArmon, P.C., our team of lawyers have the experience needed to provide you with the best bankruptcy advice. A Groce & DeArmon, P.C. bankruptcy attorney would be happy to speak with you and get your business back to health.