Bankruptcy can be the answer that struggling small businesses are looking for in order to keep the doors open or to quickly close the doors. The type of relief that a business can expect through bankruptcy will decide on not only the chapter of bankruptcy that is filed, but also the type of business it is. When filing Chapter 11 and Chapter 13 bankruptcies, businesses can stay open while making monthly payments to their creditors. However, under business bankruptcy laws regarding Chapter 7, it allows the business to close in a transparent and efficient process.
It is important for business owners to know that not every bankruptcy option is appropriate for every business. When a business owner decides to file for bankruptcy, the business can be affected in different ways. If the wrong type of bankruptcy is filed, your personal finances may be negatively affected. In some cases, you may even face litigation. These are some of the reasons why you should consult with a bankruptcy attorney who specializes in business bankruptcy laws.
If you are the sole proprietor, then your business is considered to be a part of you and not a separate entity. This means that you are responsible for the debts incurred by the business. As a result, any chapter of bankruptcy you decide to file must include both your business and financial assets and debts.
If you choose to file Chapter 7, one of the biggest advantages is that all assets become part of the estate. Under the law, you may be able to retain some assets. However, assets that are not exempt will be sold by the bankruptcy trustee.
Under Chapter 11 and 13, the doors of your business will remain open. One requirement is that the business must bring in enough money every month in order to make the required monthly payment.
Corporations and partnerships frequently file for bankruptcy. However, the difference between a corporation and a sole proprietorship filing is that corporations are not able to discharge debts. A Chapter 7 filing leaves the liquidation of assets in the hands of the bankruptcy trustee, but with partnerships, the partners are still responsible for debt.
It is critical that business owners understand bankruptcy business laws before they decide to file for bankruptcy. Speak with a qualified attorney so you will understand your options, the advantages and disadvantages of filing.
Are you a business owner in North Georgia interested in learning more about your debt relief options? Contact us to schedule a free consultation.