If you are a business owner who is drowning in debt, it may be time to consider filing a business bankruptcy. Depending upon the financial situation your company is facing, you may want to reorganize or liquidate the business.
If you are a sole proprietor or you have a general partnership, you can be held personally liable for the business debts. This means that you will be required to file a personal bankruptcy to discharge the obligations of the business.
If your company is incorporated as a corporation or limited liability company (LLC), you are probably not personally liable for the company’s debts (unless you signed personal guarantees). This means that creditors can only go after assets of the business. Thus, the business can file its own separate bankruptcy case. However, it is important to confer with an experienced attorney to discuss how the business bankruptcy filing will impact your personal finances.
A business can file a Chapter 7 or 11 bankruptcy case (only individuals are allowed to file a Chapter 13 bankruptcy), and each has its own pros and cons.
· Chapter 7. An incorporated business that wants to close down and liquidate its assets can file a Chapter 7 case. A business in Chapter 7 cannot use exemptions and it does not receive a discharge. The trustee sells the entity’s assets to pay its creditors.
· Chapter 11. The Chapter 11 process is significantly more complex than Chapter 7 and Chapter 13, but it allows businesses to reorganize their debts through a repayment plan. If your entity qualifies as a small business, the process typically moves more quickly. A Chapter 11 filing can be more expensive and time-consuming, so it is essential to have legal counsel assist your business.
If you are interested in learning how filing a bankruptcy case can benefit you, contact Levitt & Slafkes, P.C., at 973-323-2953. You can also reach us by filling out our online form. We represent debtors in Chapter 7, Chapter 13 and Chapter 11 filings. Let us help you get the fresh financial start you need today.