If you are a small business owner then you may have substantial business debt accumulated, and bankruptcy may be able to help you deal with this debt without forcing your small business to go under and close the doors. The structure of your small business and the bankruptcy chapter that you choose to file for bankruptcy protection under can have a significant impact on the end results that you get. Small business owners have several bankruptcy chapter options, and each will offer specific benefits but may also include some disadvantages as well.
Small business owners may choose chapter 7, chapter 11, or chapter 13 of the bankruptcy code to file under. Each chapter is designed for certain situations and types of cases. Chapter 7 bankruptcy can help eliminate small business debt completely, but also involves liquidating assets in many cases if the business has substantial assets. In this situation it may not be possible to keep your small business open, retain all of the needed business assets, and stay in operation.
Chapter 11 or chapter 13 may be a better option if you are not willing to allow the small business to fold and close down. Chapter 13 bankruptcy allows you to organize a debt payment plan and rarely requires assets to be liquidated. This type of bankruptcy can last 3-5 years though, while a chapter 7 bankruptcy is normally finished in 6 months for most cases.
Before deciding on the bankruptcy chapter to use there are some very important questions and considerations that need to be examined. Does your business make a profit or do you lose money? Does the company have more assets than liabilities? Who owes the outstanding business debts, the company or you as the business owner? All of these questions can help you determine which bankruptcy chapter to file under, and even whether or not you should keep the business open in the first place.
If your small business is in the red because of the current economic conditions then it is very possible things will pick up once the economy finally improves. If you own a small business that seems to bleed cash regardless of the economic factors then you may be better off letting the business fold, and using bankruptcy to eliminate the business debts incurred instead.
The business structure and total business assets are important factors, and the liabilities and debts owed by the business also need to be factored in. A qualified bankruptcy attorney can help you determine which bankruptcy chapter to use for the desired results, and offer professional legal advice about your specific situation. As soon as your small business starts to experience financial difficulties you should consult an experienced bankruptcy lawyer, so that these issues can be resolved without the loss of your small business. Delaying this step could make things much worse, and make it impossible to keep your small business open while trying to deal with and resolve the debts owed by the business.