Though the economy is starting to show signs of recovery, the dismal effects of its downturn can be seen on the faces of many small business owners across the country. With countless people losing their jobs, many Americans have attempted to open their own business in the hopes of employing themselves and their family members. While many small, local businesses thrived, many more did not. Not only did most unsuccessful business owners incur debt while in business, many took out loans to start their business and are now unable to pay that money back.
If you are a small business owner in substantial debt, bankruptcy could be the answer to many of your problems. When deciding which type of bankruptcy to file as a small business owner, you should consider a couple of things:
- What type of business registration do you hold?
- How much business debt do you have?
- What type of debt to you owe?
- Do you want to continue being in business?
Depending on your answers to those questions, you are going to want to file either a Chapter 7 or a Chapter 13 bankruptcy, the same types available to individual wage earners. Chapter 7 allows you to sell off your non-exempt assets to pay off your debts, while Chapter 13 involves a payment plan through which you agree to pay off your debts over a number of years.
If your business is a sole proprietorship, Chapter 7 may be your best bet. In this case, you and your business are considered to be the same legal entity, and by filing Chapter 7, you are also allowed to discharge your personal debt along with your business debt. Chapter 7 also provides sole proprietorship business owners the opportunity to keep your business running after your debts have been eliminated. For a sole proprietor, Chapter 7 comes with exemptions that can help you keep your business assets.
If your business is a corporation, limited liability company or partnership, you can also choose to file Chapter 7. This will allow you to discontinue your business and will make sure the proper creditors receive their payments.
Chapter 13 is available to all small business owners, and will allow you to pay off your debts in order of priority. You will be allowed to reduce your payments and protect your business assets, which will help you keep your business operating, if that’s what you want. You can also eliminate your personal debts under Chapter 13.
Don’t wait until your debts are over your head. Take control of your financial future now and rid yourself of your burdens. File for bankruptcy and save your business, or dispose of it and start fresh.