If your small business is struggling with an overwhelming amount of debt, filing for bankruptcy may help you regain your financial footing. While it might not be ideal for your credit report, getting professional bankruptcy help can make all the difference in whether you’re forced to close your company’s doors. The relief you get from going this route will depend on the type of business and what chapter you file. Thus, it’s important that you understand the fundamentals of small business bankruptcy before submitting your claim. Below are some essential details to know if you’re considering declaring bankruptcy for your business.

Types of Business Bankruptcy

There are three types of bankruptcy small businesses can file: Chapter 7, 13, and 11. Chapter 7 will allow you to shut your operations down in an efficient and transparent manner. This is typically the best option if a business owner no longer has the means to run a company even after getting rid of debt. Chapter 13 gives businesses the opportunity to reorganize their debts and pay them off through an affordable repayment plan in three to five years. Chapter 11 is similar to a Chapter 13 bankruptcy but is designed for companies with larger amounts of debt. Both of these filings will permit you to continue running your business as you work on your repayment plan.

Business Structure

The type of business structure you operate under will directly impact which chapter you end up filing. This can be confusing, so it’s best to get bankruptcy help from an attorney if you aren’t sure what to choose.

If you are structured as a sole proprietorship or general partnership, you are personally liable for your company’s debts. In this case, Chapter 7 and 13 are the most common selections for filing for bankruptcy. On the other hand, if your business operates as a corporation or LLC, the company is responsible for the debt it’s incurred. Only Chapter 7 and Chapter 11 bankruptcies are available to business entities.

Although declaring bankruptcy can help quickly eliminate insurmountable debt, it’s imperative to keep in mind that choosing the wrong bankruptcy for your small business can negatively impact your personal finances or open you up to litigation. So, if you’re a business owner in North Little Rock, AR, seek bankruptcy help from Pray Law Firm PA before attempting the complex filing process. The firm’s experienced attorneys are available to help clients carefully explore all their options so they can make informed decisions regarding their company’s future. Contact the legal team at (501) 771-7733, or visit their website for more information on their bankruptcy help services.