Talking About Bankruptcy Services

Talking About Bankruptcy Services

3 FAQs Regarding Business Bankruptcy

by Carlos Gomez

You've likely heard of individuals filing for bankruptcy because they have too much personal debt. However, businesses can also file for bankruptcy when they can't afford their loans and bills any longer. If your small business is struggling, you may want to consider filing for bankruptcy, but first, check out these three frequently asked questions, so you know which option is right for you.

Is Personal Bankruptcy an Option?

Depending on the size and type of business you have, you may be able to file for personal bankruptcy instead of business bankruptcy. This is usually more common in people who are self-employed. For example, if you run a small craft business from your home, the lines between business and personal become blurred. In most states, you can file a personal bankruptcy if your personal debts are more than your business debts. In some states, the dollar amount is used, and in other states, the number of debts is used.

The reason it is possible for self-employed individuals to file a personal claim is because they are usually a sole proprietorship. These types of business structures are common because you don't need to file anything with the state. The downside is that you may not want your bankruptcy to affect your personal loans. If your business is a sole proprietorship, you'll likely have to file a personal bankruptcy, which will affect your personal credit too.

What Types of Bankruptcy Are Available?

Businesses can file several types of bankruptcies, which is why it is incredibly important to have an attorney help you choose the right path. Chapter 7 bankruptcy is common, and if you file, your remaining business (and personal if you are a sole proprietorship) assets will be sold to pay your creditors. Chapter 13 is less common and only available to sole proprietorship because personal assets and debts are automatically included. With Chapter 13, your bills are lowered, and your business reorganized.

Chapter 11 is common for businesses that wish to remain open after filing for bankruptcy. Unlike Chapter 13, any business can file Chapter 11 not only sole proprietorships. Again, however, the business will need to create a reorganization plan to present, showing they can continue to function, profit and afford the repayment plan. Last, Chapter 12 is only available for farmers and fishers.

What Types of Loans Are Included?

If you file a personal bankruptcy, much of your personal debt can be included, such as credit cards, personal loans, lines of credit, etc. When you file for business bankruptcy, similar types of business debt is included. Typically, you can assume most of your business costs will be included, such as business credit cards, business loans, lease, business taxes, balance owed on equipment and vehicles, etc.

If you have a Small Business Administration (SBA) loan, you may be wondering if you can discharge it because it is a government loan instead of a private lender. Luckily, you can usually include an SBA loan if you file Chapter 7 or Chapter 11. However, if you file Chapter 11, you may still need to make payments as part of the repayment plan. If you have a co-signer or used assets to secure the loan, there may be issues. Your attorney will be able to help you overcome these obstacles.

Small businesses often rack up too much debt while they are attempting to grow. Luckily, this doesn't mean you have to lose your business. A skilled bankruptcy attorney will help you choose the right option for you and your business. For more information regarding business or personal bankruptcy, contact an attorney, such as James Alan Poe, P.A., in your area today and request a consultation.  


About Me

Talking About Bankruptcy Services

Hi there, I am Shirley Lorenzo. Without adequate car insurance, every accident has the risk of leading to bankruptcy. Car accident damage caused by an under-insured individual can result in the inability to even own a vehicle until it's paid. Thankfully, bankruptcy attorneys can help discharge those debts and restore finances to a positive status. Bankruptcy requires the use of an attorney to navigate the complicated set of laws governing the process. I will use this site to talk about the paperwork, procedures and meetings required while pursuing bankruptcy. I will also share my knowledge about common bankruptcy court procedures used to discharge debts. Thanks for visiting my site.