If you’re a small business owner who has run into financial problems and debt issues, you may have wondered about what bankruptcy can do for you. With creditors hounding you, fewer customers walking through the door and shrinking revenues, it’s easy to understand.
Unfortunately, a limited liability corporation cannot file for Chapter 13 bankruptcy. So if you’ve been running your business as its own entity, you only have two bankruptcy options. You can either choose to liquidate your business with Chapter 7 bankruptcy or attempt to reorganize it with Chapter 11 bankruptcy.
Chapter 7: Liquidation
If you’ve gotten to the point where you have or are ready to give up on your business, or you no longer think it’s a profitable venture, Chapter 7 is likely the right way to go for you. Your business will be closed and your bankruptcy trustee will liquidate all of the assets, with the money going to your creditors. You will get to keep any remaining money.
This may not be the best option for those who are looking for a second chance at making their business work.
Chapter 11: Reorganization
If you’re strongly committed to keeping your business running, Chapter 11 is your best option. Under this protection, business owners get a chance to sell off their unneeded assets and to reorganize the structure of the business. Creditors must be paid off at least a portion of the debt owed, generally over the course of a payment plan.
It should be noted that, since the cost to file Chapter 11 can be steep, many small businesses do not take this road.
No matter what your situation, if you’re struggling with debt and considering bankruptcy, you should speak with a qualified bankruptcy attorney to discuss your options. There may be some solutions allowing you to avoid or delay bankruptcy and you may be able to keep your business.
Contact the Law Office of Joel R. Spivack today to discuss your finances and bankruptcy options. He has been helping New Jersey and Pennsylvania business owners get back on track for over 25 years.