Self-Employed Filing Bankruptcy – Keeping Your Business
For many people, being self-employed is a dream come true. If you own a small business, you have likely put a considerable amount of “blood, sweat, and tears” into getting your business off of the ground. If you are currently facing tough financial times, you may be reluctant to consider filing bankruptcy because of the fear that you will lose your business in the process. The good news is that many self-employed small business owners are able to protect their business by filing bankruptcy. You can resolve your financial problems without losing your business.
From a legal standpoint, businesses are either sole proprietorships, partnerships or corporations. Many small businesses do not incorporate or form partnerships, they just operate as sole proprietorship. Legally, this means that all debts and all assets of the “business” belong to you personally. A self-employed individual operating a business may file a Chapter 7 case. Due to our strong exemption laws in Texas, your business will probably not be terminated – you may continue to operate your business and discharge your unsecured debt. A Chapter 7 Bankruptcy allows you to eliminate most, if not all, of your debt in a relatively short period (approximately three to four months) while continuing to operate your business.
Some small businesses who are unincorporated elect to file Chapter 13 bankruptcy case. This option allows you to continue to operate your business and propose a repayment plan to your creditors. Chapter 13 is not available to corporations or partnerships. We generally do not advise a Chapter 13 filing for businesses because of the long period of time in which you are in an active bankruptcy case repaying your creditors (usually at least three to five years).
Some small business owners with more complicated financial issues use the option of Chapter 11 to reorganize their debt. Chapter 11 is available to individuals, corporations and partnerships. A Chapter 11 bankruptcy usually works best for debtors who have a significant income, or who have debts that exceed the debt limits on Chapter 13 or who have valuable non-exempt assets. You and your attorney will develop a repayment plan to repay your creditors. Your creditors vote to either accept or reject your Chapter 11 plan.
If your Texas small business is experiencing a financial problem, consult an experienced Texas bankruptcy attorney to decide which type of bankruptcy will work best for you.