Bankruptcy Options for Small Businesses
If you are a small business owner struggling to pay debt obligations you may be considering bankruptcy as an option. There are different bankruptcy filings to consider that are based on how your business is organized. It helps to get a better understanding of each bankruptcy option before making the decision to file.
Chapter 7 Bankruptcy
An option for individuals and businesses, this filing Chapter 7 bankruptcy is often filed by those with little or no assets. This has also been an option for businesses looking to liquidate assets. When you file if you are looking to have debt discharged you’ll need to provide income details to prove you’re unable to pay outstanding balances. There are exemptions available to help protect business assets.
Chapter 13 Bankruptcy
A repayment plan option that allows debtors to repay their debt under a court approved payment plan. Chapter 13 bankruptcy is commonly sought by business owners who are sole proprietors or are not considered separate legal entities. If an individual is personally liable for business-related debt it may qualify for this filing. The repayment plan period lasts 3 to 5 years.
Chapter 11 Bankruptcy
Businesses that operate as a limited liability company (LLC), partnership or corporation seek protection under this chapter. This option is known to help businesses remain in operation while debts are restructured. Chapter 11 is considered an option for those who owe too much to file Chapter 13.
While each chapter offers benefits for financial relief for businesses, each situation is different and it’s recommended to discuss questions and concerns with a bankruptcy attorney .