When you run a small business, struggling with insurmountable debt can be a stressful experience. It will impact you personally and professionally, putting your financial future at risk. Fortunately, declaring bankruptcy provides a viable debt relief solution. However, before you begin the filing process, you must determine whether Chapter 7 or Chapter 13 bankruptcy is the right option.
What to Know About Filing a Chapter 7 Bankruptcy
Chapter 7 bankruptcy is available for small business owners to file on behalf of their company or themselves. If you operate as a sole proprietor, you will need to consider filing a personal bankruptcy, as you are legally viewed as a single entity with the business. In this instance, you can use one bankruptcy to discharge personal and business debts, while exempting the company’s assets. This means you can keep the business and continue running it after regaining financial freedom. In the event the business is structured differently, a Chapter 7 bankruptcy will require you to liquidate the company and close it down.
What to Know About Filing a Chapter 13 Bankruptcy
With this option, you are given the opportunity to reorganize the debt into an affordable repayment plan. Since you will be working on paying back creditors, you will be eligible to keep all your assets even if you’re a separate entity. You may also reduce what you owe on a secured debt and payoff priority creditors. Chapter 13 bankruptcies take longer to complete while payments are being made, and you can only eliminate your personal liability for business debts. The company will still have a financial obligation to pay back creditors.
To figure out which type of bankruptcy is best for your small business, seek counsel from an attorney who specializes in this area of law. Based in Dothan, AL, The Gil Law Firm has offered entrepreneurs throughout Alabama, Georgia, and Florida superior legal services for 18 years. They have extensive knowledge of the Bankruptcy Code and can smoothly guide you through the filing process for Chapter 7 or Chapter 13 bankruptcy. Call (334) 673-0100 or visit their website for more information about the firm.