Bankruptcy and Your Small Business
Are you worried about your business’ financial future? In some cases, bankruptcy may be the only option for partnerships, corporations, LLCs and other business entities suffering from declining profits and rising debts. Small businesses have three bankruptcy options available:
When your business has no future, it might be time to file for Chapter 7 liquidation. Chapter 7 is a good option when your debts are overwhelming and you are not making enough profit to cover a restructuring of monies owed. Assets and property are liquidated and sold by an independent trustee. The profits are distributed to the business’ creditors.
Chapter 11 is a reorganization rather than a liquidation of a business. After filing under Chapter 11, businesses are allowed to remain in possession of their assets and continue to conduct business. Businesses protected by Chapter 11 have the ability to object to creditors’ claims, avoid liens, reject leases, extend repayment periods and even reduce amounts owed on certain debts.
Only available to sole proprietorships, Chapter 13 is another form of reorganization. However, the business owner cannot file for Chapter 13 in the name of that business, only as an individual. The business owner files a repayment plan with the court to consolidate debts into one manageable monthly payment. As a sole proprietor, your business is a legal extension of your personal assets. Filing for Chapter 13 can protect your personal assets and property from Chapter 7 liquidation.
Bankruptcy doesn’t mean you are a failure. Orange County business bankruptcy is a common occurrence due to stiff competition, changing markets and ever-rising inflation.
In 2009, small business bankruptcies rose 81% in California. California continues to have the highest small business bankruptcy rate in the country. You are not alone. Consult with Orange County bankruptcy attorneys to learn more about your financial options.