Types of Bankruptcy Filings for Business Owners

Whether you have a small business with just a handful of employees or a large corporation with thousands of workers, you might find yourself in the position of filing for bankruptcy. Though there are some similarities between individuals and companies that file for bankruptcy, there are some differences as well. The most common type of bankruptcy for a company is a Chapter 11, but you may have the option of filing for Chapter 7 or Chapter 13 as well. Look over your options carefully and get an idea of what each one entails before meeting with a bankruptcy specialist or lawyer.

Chapter 7

One of the more common options available to business owners is a Chapter 7 bankruptcy. If you run and own a business and have debts of your own, you may have the chance to file for a bankruptcy of both your business and your personal assets. With a Chapter 7, the court will take all your assets and sell those assets to pay off your debts. Most business owners will find that this type of bankruptcy requires that they close their companies. If you are the only owner, the court may find that you can continue running the company even after filing because of the exemptions that you claim.

Bankrupt Calculator Showing No Finance Ability
Bankrupt Calculator Showing No Finance Ability

Chapter 13

The only way you can file for Chapter 13 is if you are the only owner of your business and you do not have any investors or partners. Chapter 13 is a type of personal bankruptcy that is usually only open to individuals. The main difference between this and Chapter 11 is that you usually do not lose any of your assets. The court can either work with you to make payment arrangements with your creditors or discharge most/all of your debt. You are still responsible for some bills, including student loans, child support and alimony payments. If you own a business and file for Chapter 13, the court will typically shut down your business and discharge the debts you owe because of your company.

Chapter 11

The best option for those who want to keep their companies operating is a Chapter 11 bankruptcy. Unlike the other options, which often result in the closure of a business, Chapter 11 filers can keep their companies. You will need to work with your attorney and come up with a complete list of all assets owned by your business, but you can also claim certain exemptions to limit what your credits can take. The court will help you restructure your business to reduce your debts and pay off your creditors.

What Bankruptcy is Right for Your Business?

The best way to determine which type of bankruptcy is right for you is with help from a professional attorney like Suzzanne Uhland. Your attorney can show you which exemptions will limit your debt and prevent creditors from taking certain types of property. A good attorney can also help you decide if a personal bankruptcy is better than a business bankruptcy and whether you can save any of your personal assets. When deciding on which type of bankruptcy is best for your company, keep in mind that some require a payment plan. Following a payment plan may reduce your earnings and limit the money you have to operate your company.

About the author 

Contributor

  • {"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}
    >