When you run a small business, keeping afloat is often a challenge. Sometimes profits stray too far over the wrong side of the margin; resulting in a business that has become unprofitable and mired in debt. For other small business owners, getting to where they need to be involves getting into financial hardship that may result in losing the business, if those debts are not paid.
The hard reality is, a large number of small businesses in Georgia fail because of the owner’s inability to pay creditors, for various reasons, which are not related to the viability of the business. For these small business owners, bankruptcy may present a suitable option. The decision is then whether you should declare bankruptcy as a business or as both a business and an individual.
The decision largely comes down to which options are more effective, depending on the debtor’s circumstance. Both as a business owner and individual, Chapter 7 or Chapter 11 bankruptcy are the most likely options that would apply to small business owners in Georgia.
Chapter 7 Bankruptcy
If your personal financial interests are effectively invested in your small business, Chapter 7 bankruptcy may present a suitable solution to debt problems. This applies to small business owners who have personally guaranteed loans and wouldn’t receive a discharge of those debts through filing bankruptcy for the business. Unfortunately, this option often involves shutting up shop on the business and filing Chapter 7 bankruptcy against the individual’s debts.
A means test, which helps determine if you are eligible for Chapter 7, may apply if you are attempting to use Chapter 7 bankruptcy to clear debts in your name relating to a small business, but the means test may not be applicable if more than 50% of your total debt is related to the business. It is important to seek guidance from a bankruptcy lawyer or debt management advisor in order to determine whether you are likely to qualify for Chapter 7 bankruptcy.
Chapter 11 Bankruptcy
If you want to save your business and believe restructuring may work, Chapter 11 bankruptcy is a route you may want to consider for your small business. When you file Chapter 11 bankruptcy, you can use revenue your small business earns to pay debts over an agreed extended period. As the small business owner, you are responsible for putting forward a reorganization plan that will allow you to pay creditors over the extended period of time.
All bankruptcies, including Chapter 11, are complex, so you should consider all alternatives before committing to this course of action. An experienced Georgia bankruptcy lawyer can help you make the right decisions, both as an individual and small business owner. Protecting your interests and regaining financial stability should remain the ultimate goal at all times.
H. Lehman Franklin P.C.
If you need advice, guidance, or help with filing bankruptcy in Georgia, you can reach out to the offices of H. Lehman Franklin P.C. We are here to support you through this difficult time as a small business owner. Call today at 912-764-9616 or email us at firstname.lastname@example.org to find out how we can provide assistance as you navigate all your options for addressing small business debt.