Bankruptcy & Your Small Business
Financial hardship is difficult for any individual but for business owners, it can be particularly stressful as the line between personal and business finances may become blurred. You may have racked up a lot of personal credit card debt and may be considering filing for personal bankruptcy, but yo
The Most Common Types of BankruptcyFirst, you need to know about the three most common types of bankruptcy: Chapter 7, Chapter 11 and Chapter 13. Under a Chapter 7 bankruptcy, which is a liquidation, assets are used to pay debts, and any remaining debts are "wiped out". A Chapter 7 filing can be utilized for both individuals and businesses. A Chapter 11 or 13, which are also available for individuals and businesses, commonly referred to as reorganization, allows debtors with a regular income to set up a new timetable for paying off creditors, while keeping their assets.
Consider How Your Business is Set UpThe second thing to consider is how your business is set up. If you are a sole proprietorship, and are simply operating the business in your own name, then there is no way to separate your personal assets and liabilities from those of your business. Therefore, any business assets (in excess of the exemption you are allowed) could be surrendered as a part of the bankruptcy. Also, any receivables of the business or other potentially valuable business property could be claimed by creditors in a bankruptcy.