Bankruptcy is not limited to individuals and couples. Businesses are also permitted to file for bankruptcy relief. Due to the recession and the slow economy, many businesses have experienced financial problems. Large airlines and commercial companies file for bankruptcy each year as do small businesses such as local, family owned and operated businesses. Regardless of the size of a business, bankruptcy may be a way for the company to continue operating or systematically shut down.
Chapter 7 Small Business Bankruptcy
When a small business files Chapter 7 bankruptcy, the intent is to stop operating the business and close the doors. Chapter 7 is a liquidation bankruptcy – the assets of the business will be liquidated and the proceeds distributed to its creditors. This applies to partnerships, corporations, LLCs, and other formal business structures. A self-employed person or sole proprietor can file a personal Chapter 7 case and continue operating the business in most cases.
One major disadvantage of filing a Chapter 7 small business bankruptcy is personal liability. If the owner of the company has personally guaranteed the debts of the small business, the owner will be personally liable for those debts. The small business bankruptcy will not discharge the owner’s personal liability to repay those debts. In many cases, the owner will also file a personal bankruptcy case to discharge the personal liability for the small business debt.
Chapter 13 Small Business Bankruptcy
A business cannot file under Chapter 13 of the Bankruptcy Code; however, a sole proprietor or self-employed debtor can file under Chapter 13 and continue to operate the business. A sole proprietor can retain the business assets and continue earning income from the business under a Chapter 13 case while reorganizing the business debts into an affordable repayment plan. Corporations, partnerships, and LLCs are not permitted to file under Chapter 13. If a business needs the assistance of the bankruptcy court to reorganize debts, it must file under Chapter 11 of the Bankruptcy Code.
Is Your Small Business in Financial Trouble?
If you own a small business, are self-employed, or a sole proprietor, bankruptcy can help you reorganize your debts to save your business. It can also help you eliminate the personal liability you have for the business debts of a failed business. Your first step in deciding how to proceed is to get information about all of your options. Contact my office to schedule a free bankruptcy consultation to find out how bankruptcy can help you save your small business.
Contact an Experienced Mount Holly Bankruptcy Attorney
Personal Approach, Professional Service, Affordable Payment Plans
The Law Office of Travis J. Richards, LLC is a full-service Mount Holly bankruptcy law firm focused on Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, debt consolidation, credit repair, tax liens, student loans and foreclosure. We represent clients in Burlington County and throughout South Jersey.
Contact our office at 609-267-5297 to schedule your free consultation to discuss bankruptcy and non-bankruptcy alternatives. You may also use our convenient online contact form and one of our friendly, professional staff members will contact you to answer your bankruptcy questions and/or schedule a free consultation with Travis J. Richards.
Latest posts by Travis Richards (see all)
- Should I Use A Loan Consolidation To Solve My Debt Problem? - 08.20.2015
- Best Way to Pay Off Student Loans - 08.18.2015
- What Is Foreclosure? - 08.13.2015