If a person owns a business and is struggling with debt, there are different bankruptcy options available. Different bankruptcy types are available to those who own small businesses, but the traditional “business bankruptcy” may not always be the best option. If the business is run as a sole proprietorship, the business owner can file for personal bankruptcy and include business debt. Read on to learn how business bankruptcy lawyers with Stlbankruptcyfirm.com can help business owners through the bankruptcy process.
Bankruptcy Options for Small Business Owners
The organization of a business can make a substantial difference in the way bankruptcy works. If the business is run by a sole proprietor or by a partnership, it is considered to be the same legal entity as the owner and/or partner. Therefore, a business bankruptcy can affect the owner’s personal assets and credit rating. With those facts in mind, options include:
* Chapter 11- It’s only a choice for businesses with substantial assets and debt; it’s rare for sole proprietorships to use this type of bankruptcy. Chapter 11 is otherwise known as “reorganization” bankruptcy, and it allows business owners to repay debts while staying in business.
* Chapter 13- This is the best option for small businesses, as the owner and the business are included. There’s no forced sale of assets in chapter 13, but the business owner has to prove that they have enough income to repay some debt. For a self-employed person or a sole proprietor, this requires that income be tracked for six months before filing.
* Chapter 7- This type of bankruptcy is a choice for those who do not have enough income to repay any of the debt. The business owner will be required to show proof of income, and to pass a means test. With chapter 7, assets may be sold to repay creditors. However, there are some exceptions, but in many cases the business cannot survive a chapter 7 filing.
Making the decision on which type of bankruptcy to seek can be difficult, and business owners should consider hiring Business Bankruptcy Lawyers to determine their legal options. A lawyer will evaluate the client’s business and personal debts and assets and help him or her decide which bankruptcy is most appropriate.
Like us on Facebook.
