Sometimes small businesses need to file bankruptcy. While having a small business can be a tough but rewarding venture, it can also become a financial burden. Owning a small business is a time consuming investment that demands a lot of patience, calculations, and hard work; but if done correctly, there can be a lot to gain from having your own business. However, there are unforeseeable events that can happen and the business suffers. Sometimes it drops and you suddenly find yourself in a mountain of debt and it becomes really difficult to see a solution. Bankruptcy is one of the solutions that can help you and even give you a fresh start. One of the decisions that needs to be made before filing for bankruptcy is whether you want to continue to run the business or to let it go.
Making a Decision Regarding the Business
If the filer has decided to keep running the business, there are some aspects that need to be considered. One of the first things to consider is whether the business is still making money. If the business is not making any money then closing it might be a better option, however, if it is a profitable business but it is simply going through an extended rough time, it might be better to keep it open. It also good to know whether the assets that are in the business are worth more than any debt the business has. One last thing to consider is whether the owner is personally liable for the business’ debts. If that is the case, it might be good to keep the business open until everything can be resolved, because if the creditors might want to go after the owner’s personal assets in attempt to collect the debts.
Keeping the Business and Filing Bankruptcy
When filing for a Business Bankruptcy, there are different chapters that can be filed, Chapter 7, Chapter 11 and Chapter 13.
Chapter 7 Business Bankruptcy
Chapter 7 bankruptcy is considered the best option for businesses that have one owner and want to continue to keep the business running. The owner can simply file a petition for bankruptcy and the process will begin, it is beneficial because it discharges both business and personal debts and it gives some exemptions to the filer. It is important to remember that if your business has a lot of assets that are not exempt; it is possible that the court-appointed trustee will use those assets to settle as much debt as possible. If the business has more than one owner, is a limited liability company, or is a corporation, and they want to continue to keep the business open, then Chapter 7 is not the best choice. In a business chapter 7, the trustee liquidates the assets to re-pay the creditors and closes the business, there are no exemptions available. A business that file a Chapter 7 will typically cease operation shortly before or upon filing a Chapter 7 case.
Chapter 11 Business Bankruptcy
Chapter 11 bankruptcy is considered the best option for businesses that are in a situation where they have enough assets and business opportunities to actually reorganize and move forward as a profitable enterprise. Businesses choose to file Chapter 11 because they feel that their future revenues and profits will be higher than the liquidation value of the business assets. Typically, a business actually files a Chapter 11. Individuals rarely but sometimes file a Chapter 11. When this does happen, it is usually a business owner or someone with business interests that files a Chapter 11 as an individual.
Chapter 13 Bankruptcy for Business Owners
A Chapter 13 bankruptcy can only be filed by individuals, this means that if the business has multiple owner is a corporation a Chapter 13 cannot be filed on its behalf. If the sole owner has significant assets invested into the business that are not exempt and they do not want to lose their business or their assets, then Chapter 13 is the often considered the best choice. This is because in a Chapter 13 case no assets will be taken to repay the debts, instead the debts will be reorganized and a monthly payment plan will put in place. It is also possible that not all the debts will have to be repaid in the payment plan, and the business owner can still receive a bankruptcy discharge. Chapter 13 cases filed by business owners allow the business owners to preserve personal assets while dealing with business debts that he or she may have personally guaranteed. A Chapter 13 business case also allows the business owner to protect personal assets under Georgia’s bankruptcy exemption laws. See O.C.G.A. § 44-13-100 for more information.
Closing the Business and Filing Bankruptcy
If the owner of the business decided to close the business, depending on how much of the debt the owner is personally liable for, filing for chapter 7 bankruptcy might be the be best hassle free option. During the business chapter 7, all of the assets are sold off and whatever money is made will be used to pay back the creditors. The upside is that instead of the filer doing all of the work, the trustee is the one who handles most of the work regarding the selling of the assets.
Additional Help and Information
If you are considering filing for bankruptcy for your business or yourself, call us at 770-609-1247 to discuss your specific situation with one of our experienced business bankruptcy attorneys. We have filed hundreds of successful bankruptcy cases, discharging millions of dollars in business and consumer debts.