Bankruptcy for Small Business Owners
Even the best small businesses can face financial difficulties. When such circumstances arise, small business owners have the option to file bankruptcy in an attempt to alleviate their debt or to restructure their payments, buying more time to get their finances in order and to repay their debts. Small businesses have a choice between Chapter 7, Chapter 11, and Chapter 13, depending on their specific situation and future plans. However, there are some things to consider before deciding which type of bankruptcy is suitable for you and your business.
Chapter 7 is liquidation bankruptcy, meaning your assets are utilized to pay your creditors. Unless you plan to shut down your business, Chapter 7 is not the best option.
Chapter 11 is a common choice for businesses, as it is a combination of both restructuring and liquidation. This can be a complicated, expensive, and lengthy process, but it can also bring you much peace of mind and debt relief. Those with less than $2.19 million in unsecured debt can expect a more simplified Chapter 11 bankruptcy process. This type of bankruptcy does allow a small business the opportunity to reevaluate their financial practices and position, helping them to regain their financial health over time.
If your business brings in a steady income, Chapter 13 is an opportunity to reorganize your debts, buying more time to pay your creditors while keeping the business running. This type of bankruptcy is solely for individuals and unincorporated businesses – a good option for small business owners.