Bankruptcy for small business owners include three options: A Chapter 7, a Chapter 13 and a Chapter 11.
Bankruptcy for Small Business Owners: Chapter 7
For debtors who do not have the means to restructure their debt and continue operating, filing a Chapter 7 may be the best route. In a business Chapter 7 bankruptcy, a Trustee is appointed, assets are sold and creditors are paid whatever the business can afford. Limited liability companies, partnerships and corporations have the option to seek debt relief by filing bankruptcy under Chapter 7. Individuals who own and operate small businesses as sole proprietorships also may file bankruptcy under Chapter 7, however their eligibility is based on their income.
Bankruptcy for Small Business Owners: Chapter 13
Since only individuals may file Chapter 13, it is not an option for partnerships, limited liability companies can be a restructuring option for small businesses owned and operated by individuals (a sole proprietorship). Only individuals may file Chapter 13, so it is not an option for businesses operated through partnerships, limited liability companies, or corporations. Not all businesses are eligible to file a Chapter 13. Since April 2016, an individual who has more than $394,725 in unsecured debt or $1,184,200 in secured debt is not eligible to file a Chapter 13.
Bankruptcy for Small Business Owners: Chapter 11
Another option available for small business owners is filing a Chapter 11. It gives businesses a chance to restructure the debt and regain profitability.. Generally, small businesses try avoid filing a Chapter 11 it may be very expensive, time-consuming and complicated. Chapter 11 is also the only bankruptcy option for individual business debtors who want to restructure but but have too much debt to meet Chapter 13’s eligibility requirements.
Other debt relief options for financially strapped business owners include:
- Small Business Debt Settlement
- Debt Negotiation
- Merchant Cash Advance Debt Relief
- SBA Loan Default Help
- Business Loan Defaults
To find out more about business debt relief options, speak to one of our experienced bankruptcy lawyers today.