If you’re in financial trouble and have run up what seems to be insurmountable debts, bankruptcy may be the only reasonable option you have. As a small business owner, you’ll have to choose between different bankruptcy options, namely Chapter 7, Chapter 11, and Chapter 13. What option would be a good choice for you and would truly allow you to start over again, in the best possible way?
The kind of bankruptcy that would help you most depends on your particular circumstances. There isn’t a one-size-fits-all answer. When making your determination, consider the following factors.
Type of Business Entity
If you have a sole proprietorship, then you could choose Chapter 7, 11, or 13. Filing for Chapter 7 bankruptcy wouldn’t allow you to continue running your business; Chapters 11 or 13 would allow you to restructure and repay your debts while continuing your business. In general, individuals operating as sole proprietorships may hesitate to file for Chapter 11 bankruptcy because of the complexity and expenses associated with it; however, a good lawyer will help you handle it smoothly and expedite the process as much as possible.
What if your business isn’t a sole proprietorship, but is instead another business entity such as an LLC or a corporation? In those cases, you would have the option of either filing for Chapter 7 bankruptcy or Chapter 11. If you’re seeking to reorganize your business and keep running it, Chapter 13 wouldn’t be an option.
Amount of Business Debt
You can’t file for Chapter 13 bankruptcy if your debt exceeds a certain amount; the upper limits differ for unsecured vs. secured debt. If you exceed the limit, you could still file for Chapter 11 bankruptcy if you want to keep running your business and pay your debts in a structured timeline.
Continuation of Business
Chapter 7 bankruptcy will get many of your debts discharged, but you’ll also have to shut down your business. When deciding whether or not to file for Chapter 7 bankruptcy, think about why you’ve gone into debt. Is there something fundamentally flawed in your business plan? Might it be a good idea to shut down your business, and after rethinking things for a while perhaps start fresh?
If you live in and around Kansas City, you can get the assistance of a Kansas City business bankruptcy attorney to go over the pros and cons of each bankruptcy option and determine what you’re eligible for. When you contact us, you’ll find advocates who will fight for you in bankruptcy court to get the best terms possible.