Small business owners grappling with debt can benefit tremendously from Chapter 7 bankruptcy. In the majority of cases, entrepreneurial, sole proprietorships share the same debt as the owner, as you will often be personally liable for debt incurred through the operation of a business. This means that your business and you as the owner are one in the same.
Chapter 7 for Sole Proprietorships
When filing for bankruptcy, over half of your debts must be from business debt versus personal. When filing for Chapter 7 bankruptcy as a business you eliminate the need to pass a “means test” in order to file. This is one major advantage of filing Chapter 7 bankruptcy as a business owner.
Chapter 7 Bankruptcy for Corporations and LLCs
Your business structure is important when considering Chapter 7 bankruptcy. In a Chapter 7 bankruptcy, a corporation or LLC desires to go out of business and have the bankruptcy worry about liquidating the business assets and dividing the proceeds among the company’s creditors. Chapter 7’s are considered excellent options for a pain-free and orderly liquidation of the business. One of the primary downsides of filing bankruptcy through a business entity is your personal debt will remain unaffected.
Dischargeable Business Debts
How your business is structured and how you obtained financing for the company is important. Business debt, including rent, supplies, pay for independent contractors, money owed to equipment rental companies can all be discharged in a bankruptcy. As long as you’re a sole proprietorship, you will also be able to include credit card debt, unsecured loans, and medical debt in the list of debts to be discharged. If you have a lease on a business vehicle or other equipment, you can keep it assuming you don’t have much equity in the property and arrange to reaffirm the debt and continue making payments. The bankruptcy trustee will also allow you to exempt certain “tools of the trade” up to a few thousand dollars, depending on the state in which you file bankruptcy.
Filling for Chapter 7 Bankruptcy in Ohio
If you are a small business owner and are behind on property or equipment rental, struggling to pay vendors and contractors, or have taken out a commercial loan that you can’t pay back, it’s time to consider Chapter 7 bankruptcy. Working with a business bankruptcy attorney in Dayton will ensure that you receive a fast and easy discharge of your business and/or personal debt.