Before your business files for bankruptcy make sure to exhaust all of your other options. In deciding to file for small business bankruptcy, it is important to consult with a business bankruptcy law firm to help plan out the best route to a fresh start for you and your company.
Chapter 7 may be best route for a small business bankruptcy. If you, as the small business owner, have finances that are intertwined with the business consider filing a personal Chapter 7 bankruptcy petition. If your small business is an extension of your own personal talents and strengths and the business start-up costs are relatively low liquidation may make the most sense for both you and your small business.
Chapter 11 bankruptcy is usually too complex and expensive of a process for a small business to successfully survive. A Chapter 11 reorganization involves a precise reorganization plan that provides for you to keep your business running while increasing your revenue to pay off the business’s creditors. Additionally, your business is required to have legal representation to file for a Chapter 11.
Secured vs. Unsecured Creditors
Secured creditors are given priority over unsecured creditors under either chapter for bankruptcy. In a Chapter 7 business bankruptcy case, assets are liquidated to pay off the creditors; secured creditors first, unsecured creditors next. In a Chapter 11 business bankruptcy case, the plan of reorganization must reflect a priority of paying off the secured creditors over the repayment period while debt owed to unsecured creditors may be reduced or eliminated.
Filing Personal Bankruptcy
Oftentimes, small business owners are asked to personally guarantee their loans. This is how a small-business owner’s personal finances may be affected by the financial troubles of their business. If this is your situation, you might consider filing for personal bankruptcy. By filing for a personal Chapter 7 bankruptcy you could be alleviated from much of your small business debt.
The Business Bankruptcy Law Firms in this Website Can Help
The law firms listed in our database can help you and your small business:
- Determine which bankruptcy is right for your situation
- Walk through the complexities of the Bankruptcy Code
- Navigate the administrative tasks in filing a bankruptcy petition
- Structure a reorganization plan
- Present at the meeting of creditors and any court hearings
- Reinforce the automatic stay to keep creditors from attempting to collect business debts