If your small business is drowning in debt, bankruptcy may help obtain the relief you're seeking. While it is an option there are details to review to help you understand how the process can help. The way your business is structured could affect how you proceed. Other concerns to think about include understanding who is liable for outstanding debt and the type of debt in question.
If you are considering bankruptcy for your small business, the chapter filed may depend on your intentions. Bankruptcy can help reorganize debt, eliminate debt or liquidate company assets to satisfy debt. In some cases a personal bankruptcy may be filed or a business bankruptcy can be completed. Yet, it also depends on who is liable for business debt.
There are different options to consider for filing including Chapter 7 , Chapter 11 and Chapter 13 bankruptcies . Depending on how your business is structured (sole proprietor, limited liability company or LLC, corporation) may signal the best chapter for your situation. Each chapter presents its own advantages that should be reviewed prior to filing.
Chapter 7 can be filed by a business or a person on behalf of the business. Chapter 13 is often filed as an individual and not as a separate entity, yet if you are the sole proprietor of your business you may file this chapter as one entity. Chapter 13 allows you to make payments on debt obligations through a repayment schedule approved by the court. Chapter 11 is usually sought by businesses and individuals with more complex situations or has debt obligations that exceed a certain amount. A business or individual can file this chapter to help restructure their business if they choose to stay in operation.