If you are a small business owner and the business debts just seem to keep piling up you may be unsure of where to turn or what to do to reverse this situation. Bankruptcy is always an option for most small business owners, but this process is complex and can affect different small businesses in different ways. The structure of the small business that you own will have an impact on how well bankruptcy can resolve the business debts owed and other aspects of a bankruptcy case.
The structure of the small business is used to help determine debt liability for the small business or organization. The debt types owed by the business will also need to be considered to determine how effective bankruptcy may be at resolving financial difficulties and mounting debts. Another essential consideration is the chapter used for the bankruptcy filing and petition. Each chapter of the bankruptcy code has certain requirements that must be met before that chapter can be used.
Some chapters of the bankruptcy code are designed for individuals and joint bankruptcy petitions by consumers. Other code chapters cover business bankruptcies and debts. A third type of bankruptcy code chapter may be used by individuals, couples, and businesses. The right code of the bankruptcy law must be used in each case to get the desired results. Bankruptcy can allow small businesses to eliminate debt completely, reorganize debt or restructure debt payments, and liquidate business assets to settle company debts if necessary.
Debt liability as far as the business debts are concerned is also an important consideration for small business owners. The numerous options available for small business owners who file for bankruptcy can include Chapter 7. Chapter 11, and Chapter 13. Each chapter may be right for certain small business structures and wrong for others.
Your small business may be structured as a sole proprietorship, an LLC or limited liability company, a partnership, a corporation, or another type of business model. Each of the bankruptcy code chapters will offer specific advantages and involve certain requirements and restrictions.
A chapter 7 bankruptcy case can be used for personal and business bankruptcies. Chapter 13 bankruptcies may allow you to file for personal and small business bankruptcy in a single case. This chapter allows debts to be repaid using a reasonable payment plan that meets the court approval, and after a certain time period any remaining debt is normally discharged.
A chapter 11 bankruptcy case can be used for personal and business bankruptcy. This chapter covers situations that are more compex and bankruptcy cases where the debt amount exceeds the limits for many other bankruptcy code chapters. Since each small business is different, with varying debts, assets, and liabilities, the right chapter of the bankruptcy code may be different in each case. The end goal of the business owner is also a factor that should be evaluated. Chapter 11 bankruptcy may be able to keep the business open, while certain other chapters of the bankruptcy code may not allow this possibility.
If you are a small business owner and you are having financial difficulties or you have debts that seem excessive then bankruptcy may be a very good option. If you are not sure whether or not bankruptcy is the right case for youir small business or you are not sure which chapter of the bankruptcy code to use then you should consult a qualified bankruptcy attorney who is experienced in small business cases.