Small business bankruptcy is a very viable option for businesses drowning in debt. In addition to helping you restructure your finances and get a fresh financial start, a small business bankruptcy may also wipe out personal liability for business debt and liquidate the business entity. Depending on your financial goals for filing bankruptcy, you can either file a small business bankruptcy, a personal bankruptcy or both.
Am I Responsible for My Small Business Debt?
The structure of your company dictates your responsibility for business debt. If your business is running as a sole proprietorship or if you are a general partner in a partnership, you are personally responsible for the financial obligations of the company. Creditors may seek relief by going after your personal property if the business fails to honor its financial obligations.
If your role within the organization is a limited partner of if the business is a limited liability company (LLC), you are not personally liable for business debt. Creditors may only go after business assets. In the event that you co-signed or personally guaranteed the debt, you are still at risk.
What Are My Bankruptcy Options?
Chapter 7, 11, and 13 bankruptcies each have pros and cons. The right debt relief strategy for you depends on the nature of debt you owe and the structure of the company. Our experienced debt relief attorneys discuss how filing a Chapter 7 bankruptcy can help you.
Small Business Bankruptcy – Chapter 7
Both individuals and business entities are eligible to file Chapter 7 bankruptcy.
It is important to note that a Chapter 7 business bankruptcy does not remove your personal obligations on any business debts.
Personal Chapter 7 Bankruptcy
Your business may not file Chapter 7 bankruptcy if you are a sole proprietor. Bankruptcy law considers not to be a legal entity separate from it owner; all business assets and debts are therefore the debts of the business owner. Consequently, you must file a personal bankruptcy to get rid of small business debts. The upside it that you can get rid of both personal and business debts while still using exemptions to secure business assets. As a result, you may be able to continue running the business even after bankruptcy matter has been concluded.
A personal Chapter 7 can vacate your personal liability for the small business debts, if you were liable for the debts of your partnership, corporation, or LLC. Many small business owners who file a Chapter 7 business bankruptcy also file prefer to file a Chapter 7 in their personal capacity too.
One of the most important decisions to make when looking into small business bankruptcy is that if it is in fact the right choice to fix both your finances and the finances of your business. Our experienced debt relief lawyers will provide a comprehensive analysis of your financial circumstances and will recommend a strategy for you. If filing a small business bankruptcy is not the best action course of action for you, we can assist you with: