If your small business is in trouble, Chapter 7 can be your way out. Many people think Chapter 7 is only a tool to close down a business. It can be used for that– but more importantly, Chapter 7 can also be your key to surviving, wiping out debt, keeping your business and going forward debt free.
My Chapter 7 Bankruptcy Philosophy for Small Businesses
In my small business bankruptcy practice I file mostly Chapter 7 cases. Many business people and attorneys mistakenly assume that the only way to relieve an ongoing business from debt and to stay in business is through a Chapter 13 or Chapter 11 reorganization. That is not the case.
Smart and careful use of the exemption laws and other available property protections often make it possible for a sole proprietor or owner of a closely-held corporation or LLC to get the dramatic and unparalleled individual debt relief of Chapter 7 bankruptcy and to go forward in business.
In Chapter 7, you are entitled to:
- The protection of the Automatic Stay which stops your creditors from calling, writing or taking action against you to collect a debt.
- Your rights to keep (exempt) your assets which are protected by law. This can include assets used in your business.
- The Chapter 7 Discharge which permanently wipes out your unsecured debt.
These are the three cornerstones of the Fresh Start for you, your family, and your business.
What You Need to Know About Small Business Debt and Personal Liability
If you are a small business owner it is critical to understand the debt for which you may be personally liable. Too often, small business owners don’t consider this important issue. How you own or set up your business is an important factor:
- Sole Proprietorship: If you are the only owner and operate the business as a Schedule C sole proprietor, then you are most likely personally responsible for all of the business debts.
- Partnership: If your business entity is a partnership, your personal liability can depend on whether you are a General or Limited Partner.
- Corporation or Limited Liability Company (LLC): Even if your company is a corporation or LLC, you are personally liable for any of the debt that you co-signed or personally guaranteed. This is frequently common with many small businesses in connection with bank loans and trade creditors and suppliers. You may also be liable for certain types of tax debt of the business.
Guidance from a bankruptcy lawyer can help you determine the debt for which you may be personally liable in your small business and how to free yourself from that debt and move forward.
Set up your free consultation today by calling my office at 865-470-4250 or contacting me online