If you see your business is heading for trouble or already there, it makes sense to take steps to limit the damage. Bankruptcy is one of the mechanisms business owners can use to save a troubled business, as long as you or the business meets all the necessary criteria. Choosing the right chapter of bankruptcy for a business can be confusing. Here are some tips on keeping your business after bankruptcy.
Keeping Your Business
The first thing to consider is whether your business is profitable. A business that is losing money may not be viable, in which case closing the business could be a better option. For those businesses that can make a profit, there is still hope. Another consideration is your business assets versus any liabilities. Having a greater amount of assets than liabilities is, along with making money, a potential reason to save a business. You may be able to reorganize or have your debt discharged, depending on the type of business.
Sole proprietors who are personally liable for business debts may wish to keep a business running while negotiating with creditors, without taking on further debt. If you close the business you run the risk of creditors seeking resolution by targeting your personal assets. In this position, some individuals often file Chapter 7 bankruptcy to avoid being held liable for business debt.
Chapter 7 Bankruptcy
It is not common for business owners to file Chapter 7 when they want to keep a business. In Chapter 7, the trustee will sell off business assets with the view to paying creditors, after which the business is typically closed down. As a business owner, you can close down a business of your own accord without the need for filing bankruptcy and all the fees involved. You may get a better deal on your assets than a bankruptcy trustee. If you put a partnership into Chapter 7 bankruptcy, any partners may lose their assets as a result of the process. Consider any benefits versus the risks to you, your assets, and your partner’s assets before filing Chapter 7 bankruptcy.
However, there is an instance where it may profit a business owner to file Chapter 7 bankruptcy. The sole proprietor who is selling a service, which is essentially their own talents, doesn’t necessarily have sellable assets. An accountant is a good example of a sole proprietor of a business who is selling a skill that isn’t tangible. By filing Chapter 7 bankruptcy as a sole proprietor, your personal and business debts are combined, meaning that both are discharged. With Chapter 7 Bankruptcy exemptions, you may be able to protect any assets you do own, such as the tools of your trade.
Chapter 11 & 13 Bankruptcy
You can file Chapter 13 as an individual – you cannot file Chapter 13 as a partnership, LLC, or corporation. A Chapter 13 will allow you to include both personal and business debts. There is a chance of keeping the business open if the business has income. By paying less on your unsecured debts, it is potentially viable to keep a business going through a Chapter 13 bankruptcy.
All types of businesses can file for Chapter 11 bankruptcy. If you are a partnership, LLC, or corporation, you have the option of filing Chapter 11 bankruptcy in order to reorganize your debts. Like a Chapter 13 bankruptcy, Chapter 11 involves keeping your assets and committing to a payment plan. Chapter 11 bankruptcies are complicated, so consult with a bankruptcy lawyer in Georgia. H. Lehman Franklin P.C. can help you if you are facing bankruptcy as a business owner. Call us at 912-764-9616 or you can email our offices at firstname.lastname@example.org.