Small Business Bankruptcy Attorney
If you own a business that is currently experiencing financial difficulty, you need to speak to an experienced small business bankruptcy attorney who can inform you of your options.
- After you file bankruptcy, it may be possible to continue to operate your business.
- Bankruptcy provides an orderly way of winding down a business.
- Bankruptcy may be a way to get out from under an oppressive lease.
- There is no prohibition from you starting a new business.
Since business bankruptcies are more complicated than personal bankruptcies, they require more time and planning to do them properly. Therefore, if your business is experiencing financial difficulties, the sooner you seek legal advice, the more your small business bankruptcy attorney can do for you.
If Your Business Is in Trouble, You Need an Exit Plan
There are many reasons that a business may fail, and most of them are beyond your control:
- The cost of goods or labor rising too fast for you to keep up with
- Competition from the “big box” stores that moves into the area
- A bad business decision
- Losing a lease
- Losing a key employee
- Distributor puts the squeeze on you or favoring your competitor
- Down turn in the economy
- Health problems that prevent you from taking care of your business
- General contractor refusing to pay subcontractors in a timely manner
If it is your intent to close a business for whatever reason and there is not enough money to pay all of the creditors, then you need an exit plan. A good exit plan takes some time to prepare. As in many things, timing may be one of the most important factors.
It is important that you choose a small business bankruptcy attorney as soon as possible to make sure that you receive the protection to which the law says that you are entitled.
Should You File for Chapter 7 or Chapter 13?
Deciding whether you should file Chapter 7 or Chapter 13 depends on several factors, including:
- The structure of your business
- How much debt you have
- How many assets you have (and how much they’re worth)
- Whether or not you want to continue the business
Chapter 7 allows both sole proprietors and partnerships, corporations, and limited liability companies to liquidate their debts. However, none of your assets will be protected by exemptions. Therefore, Chapter 7 is only a good idea if your business doesn’t have many assets, or you have no personal liability for the business debts.
Since only individuals can file a Chapter 13, you can only choose this chapter as a sole proprietor. This chapter allows you to protect your business assets, and you can keep the business going during the bankruptcy process. However, your debts are only discharged in a Chapter 13 after you completely finish your plan payments — whether that is three years or five years.
Personal Liability for Business Debts
You may be wondering if you are personally liable for your business debts. This will depend on the structure of your business. If you are a sole proprietor and not a legal business entity, then you may be responsible for business debts. Any business bankruptcy that you file may actually be a personal bankruptcy. However, if you formed a partnership, corporation, or limited liability company (LLC), then you may not be personal responsible for business debts.
If you are personally liable for business debts, it’s important to consult with a small business bankruptcy attorney who can help you determine which type of bankruptcy is right for you. It can be difficult to know what steps are right for you and your business. A lawyer can guide you through your specific situation.
Chapter 7 Bankruptcy for Small Businesses
A Chapter 7 bankruptcy can help small businesses as well as their owners. Chapter 7 is often called “liquidation” bankruptcy. Although most of your debt will be completely eliminated through Chapter 7, it can require you to give up some of your property as well. A small business bankruptcy attorney can help you determine if Chapter 7 bankruptcy is right for you.
In a Chapter 7 bankruptcy for small businesses, all proceeds will be sold in order to pay creditors. Creditors will be listed according to priority and then your bankruptcy trustee will direct payments to those creditors who have priority.
If you file Chapter 7 as a personal bankruptcy, you may be able to completely discharge much of your debt and retain much of your property. Small business owners and sole proprietors may be able to file personal bankruptcy and eliminate business debt that is in their name as well. Those debts that are unsecured, or not tied to property, may be discharged directly. You may also have to sell or return other property that is connected to secured debt.
A small business bankruptcy attorney can help you decide if Chapter 7 is the right type of bankruptcy for you and your business. If most of your debt is unsecured and you don’t have much property to lose, then Chapter 7 might help you get rid of most of your debt and start fresh.
Chapter 13 Bankruptcy for Small Businesses
Chapter 13 bankruptcy is often called “reorganization” bankruptcy. It can help you keep most of your property while obtaining a manageable payment plan for your debts. Although small businesses cannot file Chapter 13, an individual or business owner may take advantage of this type of personal bankruptcy.
Chapter 13 bankruptcy allows you to gather your debts into a single payment plan. If you have many secured and unsecured debts that are unmanageable in separate payment options, then you can collect them into one payment. Some of those creditors may also reduce your interest and other fees, thereby reducing your debt overall.
If you need to file personal bankruptcy, but don’t want it to impact your business, then a Chapter 13 might be the answer for you. Chapter 13 will not touch your business assets. Moreover, it can allow you to reorganize your personal debts away from those of the business.
You should work with a small business bankruptcy attorney if you want to file Chapter 13. As a small business owner, you may be able to eliminate some of the business debt that you own personally. Any debt that belongs to a business, including partnerships, corporations, and LLCs may not be eligible for elimination through Chapter 13. However, a lawyer can help you understand which debts can you managed through Chapter 13.
How Does the Automatic Stay Work?
One of the biggest benefits of bankruptcy is an automatic stay. When you file bankruptcy, the court issues an order for an automatic stay. This puts all debt collection on hold for a period of time. If you are dealing with calls, lawsuits, wage garnishment, repossession, and more, then an automatic stay can stop these efforts right away.
There are exceptions to the automatic stay. If you have filed bankruptcy within the past year or multiple times, then you may not receive an automatic stay or your automatic stay may be limited. A small business bankruptcy attorney can evaluate your situation and help you understand how the automatic stay will impact you.
Speak to a Small Business Bankruptcy Attorney Today
Your small business bankruptcy attorney can help you determine which bankruptcy chapter is right for you. Diane Anderson specializes in business bankruptcy. Call the Law Office of Diane Anderson today and set up an appointment.