No business owner wants to file for commercial bankruptcy, but when debt starts piling up and profits just aren’t coming in, it may be the best choice. If you’re facing financial hardships and unsure of how you want to proceed with your business, it could still be possible to keep your company operational by filing for bankruptcy. Find out more about whether this option could be right for you below.

4 Commonly Asked Commercial Bankruptcy Questions 

What is commercial bankruptcy?

Just as an individual can go bankrupt when they’re unable to pay their debts, a business can also file when it faces mounting debt and is no longer able to pay or make profits.

Businesses don’t have to meet any income requirements or pass a Chapter 7 means test to be eligible for bankruptcy, but in some cases, a business owner may have to forfeit some of their personal assets. 

What’s the purpose of filing for bankruptcy?

Bankruptcy is a form of protection that can help companies stay open despite financial hardships. It can allow for the reorganization of a business, in which the company revisits negotiations with creditors so debt can be paid off in a way the company can manage.

Or, if the business needs to close, filing can prevent a company from being accused of pillaging assets by creditors and alleviate the financial burden of shutting down. 

Should I file personal or business bankruptcy?

A company that goes into debt should file a business bankruptcy, while individuals who can’t pay their bills will naturally file for personal bankruptcy.

In some cases, however, the answer may not be so clear; the owner of an individual pet training business, for instance, may be unsure of which to file.

While you should consult with a professional before making your determination, if your debt is mostly consumer debt—associated with personal or household use—you will likely file personal bankruptcy.

Which debts are considered business debts?

Business debts are not for use by an individual, family, or their household. Business debt may, therefore, incorporate loans, leases on commercial property, taxes, and payments owed on company vehicles. If your business owes money to vendors for supplies or services, these can also be accounted for under business debts.

Whether you’re considering filing for personal or commercial bankruptcy, the office of Donald L. Spafford, Jr., Attorney at Law is here to help. Serving the Honolulu, HI, community, this attorney has more than 30 years of experience, and he and his team will help relieve you or your business from mounting debt by filing for the appropriate form of bankruptcy. Schedule a free consultation by calling (808) 532-6300, or visit the office’s website for more information on how they can help you.