When you decide to file for bankruptcy as a business owner, you want to be sure that you have all of your ducks in a row. A Bergen County bankruptcy lawyer from our firm can help you get organized and figure out if filing is the right move for you. Here’s what you should know before you schedule a consultation.
What Kind of Bankruptcy Can a Business Owner File For?
There are three types of bankruptcy that a business owner can file for, but the ownership structure of the business is important to consider. A sole proprietor, someone who owns the business on their own, might have different options than someone who owns a business as part of a partnership. This is why it’s important to consult with an attorney.
Chapter 7 and Chapter 11 are the most common types of bankruptcy used by business owners. Chapter 13 is not an option for businesses. However, it can be an option for a business owner if they want to deal with their personal debts.
What Happens to a Business Owner’s Debts in a Chapter 7 Bankruptcy?
Chapter 7 is known as a “liquidation” bankruptcy. This can erase the business and personal debts of a business owner, but any assets that are not protected by exemptions can be sold out. This can usually result in the closure of a business. If you sell off assets that were necessary to your company’s operation, it can be difficult to come back from that. If you’re running a service-based business that doesn’t require much in the way of equipment, you might be able to come back from Chapter 7 bankruptcy.
Now this is generally not an option for a business run by a partnership because it can lead to disputes and litigation. An LLC or corporation is also unlikely to file Chapter 7 bankruptcy.
What Happens to Debts in a Chapter 11 Bankruptcy?
Chapter 11 bankruptcy can reorganize a company’s debts. This allows them to make a plan to pay off creditors over time and the business can stay open while this process goes on. Some companies even bounce back from this and stay in business for a long time.
This is a complex process though, so you will definitely want an attorney. It’s also rarely the best option for a sole proprietor. Again, it’s important to go over all of your options with a lawyer before filing.
When Can a Business Owner File for Chapter 13 Bankruptcy?
A Chapter 13 bankruptcy is for individuals, but it can still be useful for a business owner. This can allow you to reorganize your own personal debts so that you can continue to manage your company and keep it operational. Chapter 13 is not an option for a partnership, an LLC, or a corporation.
Talk to a Bankruptcy Lawyer
If you have any questions about the bankruptcy process or what a business owner needs in order to file, contact the Law Office of Boyd & Squitieri. We can schedule a consultation and tell you more about your options.
