Many small business owners get the financing they need to start their businesses through personal loans, personal guarantees and credit card debt. As a result, many small business owners have to manage large amounts of debt.
As a business owner struggling with debt you may be considering taking a loan from your 401(k) or other retirement account to keep your business afloat. Before you take such an extreme measure, you should speak with a NJ Bankruptcy attorney to understand all of your available options.
Most notably, in a NJ Chapter 7 or Chapter 13 bankruptcy, you can actually eliminate your personal liability for business-related debts. We’ll discuss both of these bankruptcy chapters over the next two sections.
Chapter 7 Bankruptcy
To be eligible to file a NJ Chapter 7 bankruptcy, you must pass the means test. The means test is basically a court ordered screening process used to determine if a person has the financial ability to repay their debts.
If the majority of your debts are business related, however, you may be allowed to file a Chapter 7 bankruptcy without passing the means test. A Chapter 7 discharge will eliminate a significant amount of your business debt including credit card debt, personal loans and personal guarantees.
It is important to understand that your ownership interest in your business is considered an asset in your Bankruptcy. Therefore, if the business is profitable, or has significant assets, your personal filing could put it in jeopardy. Generally, if your business is failing and your personal finances are suffering, filing a NJ Chapter 7 Bankruptcy may make sense.
It is critical that you consult with an experienced NJ bankruptcy attorney to discuss your individual circumstances before filing a bankruptcy.
Chapter 13 Bankruptcy
To file a NJ Chapter 13 bankruptcy you must have a regular source of income. Debt, including business-related debt, can be restructured under a Chapter 13 repayment plan. This repayment Plan sets forth how you intend to repay your creditors over a 3 to 5 year period. Oftentimes, you only have to repay a portion of the debt.
Once the Bankruptcy Court approves your Chapter 13 Plan, you will make one monthly payment to a Bankruptcy trustee who distributes payments to your creditors according to your plan terms.
Please note, if your business is a limited liability company or a corporation, it cannot file a Chapter 13 Bankruptcy. Additionally, there are certain limits on the amount of debt you can include in a Chapter 13 filing. We will discuss these limits with you.
If you are drowning in business-related debt and want to learn more about how filing a personal bankruptcy might help contact us. We can answer your questions and help you understand all of your available debt relief options.
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.
We are proudly designated as a debt relief agency by an Act of Congress. We have proudly assisted consumers in filing for Bankruptcy Relief for over 30 years. The information on this website and blogs is for general information purposes only. Nothing should be taken as legal advice for any individual case or situation.