Can a Chapter 7 Bankruptcy Solve Business Debt Problems?
Are you an entrepreneur with overwhelming business debt problems? If so, then the following material can be deemed informative to you. Since the outrageously terrible 2008 economic collapse, the amount of small business owners that filed for bankruptcies has increased exponentially.
The reasons you could be considering bankruptcy is either because of a large sum of unaffordable debt, you can’t operate lucratively because of costly sales contracts or equipment lease, creditors are pestering you, you are facing an immoderately priced lawsuit and you aren’t able to handle your personal bills.
Although not a panacea for all business owners, a Chapter 7 bankruptcy might be the solution for the aforementioned mishaps. However, a Chapter 7 bankruptcy is not a solution for some small business owners. If you are a sole proprietor or a general partner – meaning that you are personally accountable for all your business debts – you are personally liable for the business debts, and thus you can get them discharged through a Chapter 7 bankruptcy. Specifically for a sole proprietorship, you can use your exemptions, when filing for bankruptcy, in order to continue operating. If your business entity is a corporation or a limited liability company, you are usually not liable for the business debts unless you cosigned a debt. On the other hand, it is the corporation’s or the limited liability company’s responsibility to pay off their debts and file a business bankruptcy to discharge the debts.
Moreover, you might have to stop operating and liquidate your business when you file for a Chapter 7 personal bankruptcy. Closing down your business won’t be a hard decision if you want to do it. But, if you refuse to, you will have to shut down your business temporarily as per the bankruptcy process. A special case in which you might be able to keep operating during a Chapter 7 bankruptcy is when your business is a service that has a small number of assets. Many business owners stop operating and then file for Chapter 7 bankruptcy to eliminate their debts. Later, they open up and start operating similar businesses. Chapter 7 bankruptcy might not be a suitable option if you prefer to operate your business during the bankruptcy process, especially if you have valuable assets that might have a risk of being lost during the process. A more suitable option for you would be a Chapter 13 bankruptcy, which is an adjustment of debts of an individual with regular income. With Chapter 13 bankruptcy, you can work something with your creditor through negotiation.
The bankruptcy system in our country is very efficient. If you are burdened by debt and reached to the point of bankruptcy, you should consider taking advantage of this system. There are many options that are available. Find out which option optimally suits your best and take back control of your business endeavors.