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How do i know if i’m choosing the correct bankruptcy for my business? Who can i talk to about bankruptcy? will business bankruptcy hurt my personal assets?
How do I Choose the Correct Bankruptcy for my Business?
For businesses that are struggling with finances, bankruptcy can offer a business owner options to stay in business or to close the business. Bankruptcy can bring relief to a small business owner depending on the type of business and bankruptcy filed.
Under chapter 13 bankruptcy a small business, whether a sole proprietor or incorporated entity such as a limited liability company (i.e. LLC), can stay open and make monthly payments to creditors to pay off debt. If the business isn’t receiving enough income/revenue in a month then it can file under chapter 7 bankruptcy and close the business in an efficient and transparent manner.
Choosing the incorrect type of bankruptcy may negatively affect the business and personal finances or even subject you to litigation. To find out what type of bankruptcy is best for your small business, contact an attorney at Sheppard Law Offices today. Call us at (877) 505-9455.
What is a Bankruptcy Discharge?
A bankruptcy discharge eliminates the debtor’s liability and obligations to pay back most types of debt that the debtor owes. If your business gets a discharge in chapter 7, the business creditors cannot sue or come after your company to collect the debt. The owners of the business may also have to consider filing bankruptcy to resolve their personal obligations to the same creditors.
What Debts Does the Bankruptcy Discharge Eliminate?
A bankruptcy discharge in a personal bankruptcy wipes out your personal liability for most types of debts. The following are the most common debts a bankruptcy discharge will eliminate:
- Credit card debt
- Medical bills
- Personal loans
- Back rent
- Utility bills, and
- Most lawsuit judgments
Note: This is not a detailed list and the types of debts you can discharge in bankruptcy. The type of debts also depends on whether you file for Chapter 7 or Chapter 13 bankruptcy.
What are my options for bankruptcy under a Sole Proprietor?
If you are the sole proprietor of a small local business in Ohio, the business is not a separate entity. What this means is that you and the business are one in the same and that you are responsible for its debts. Due to this, your bankruptcy options take into account both your personal and business debts and assets.
Chapter 7 Bankruptcy for Sole Proprietors
The benefit of filing for chapter 7 bankruptcy as a sole business owner is that your business and personal debts will be discharged without you having to make payments. The time period for this action could be months. The business owner must keep in mind that bankruptcy does not eliminate all debts.
With Chapter 7 bankruptcy the law allows you to keep certain assets called “exempt assets”. If an asset is not exempt, your bankruptcy trustee would have to sell the asset and distribute the monies to your creditors. If you don’t have much property then you will be able to keep most, to all of your assets. If on the other hand, you have a large estate you may lose important assets. In this case, chapter 7 wouldn’t be a good option.
Chapter 13 Bankruptcy for Sole Proprietors
One reason to consider chapter 13 bankruptcy is that it allows you to stay in business. However, the business must produce enough profit each month to make the Chapter 13 monthly plan payments. These payments will be smaller than your current payments. This option would be the way to go with the following:
- You want to keep your business open
- You don’t qualify for Chapter 7 Bankruptcy
- You want to keep more property than is allowed with Chapter 7
Small Businesses Bankruptcy Options with a Partnership
Unlike solo businesses, partnership businesses are not entitled to a pardon of the business’s debts. There are also no exemptions to protect business property and assets. There are multiple pros and cons about proceeding with Business bankruptcy when in a partnership.
Pros of Chapter 7 Bankruptcy for Partnership businesses
Using chapter 7 bankruptcy is often easier to close a failing business. With chapter 7 you do not have the stress of selling your products, fixtures, equipment or any other assets to collect accounts receivable. Your bankruptcy trustee will be the one that is responsible for selling all business assets and distribute the monies to the creditors. This process may save the business money and avoid litigation.
Cons of Chapter 7 Bankruptcy for Partnership businesses
Like solo businesses, both or all partners in a company are personally responsible for the business debt. It is important for the partners to understand that bankruptcy will not discharge partnership debt. Filing for chapter 7 will not get rid of the partners’ personal responsibilities to pay the business’ bills.
Contact Sheppard Law Offices Today to Learn More About Business Bankruptcy
To learn more about business bankruptcy options, contact Sheppard Law Offices today and speak with one of our top-rated bankruptcy attorneys. You can contact Kenneth Sheppard, Jr. today by calling the office at (877) 505-9455.
Contact Sheppard Law Offices to discuss your particular situation. For your convenience we have law offices in Columbus, Newark, Mount Vernon, Akron and Canton Ohio, Or call today to schedule your free consultation at (877)505-9455.
Sheppard Law Offices
3535 Fishinger Blvd. Suite 190
Hilliard, Ohio 43026
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11 West Gambier Street
Mt. Vernon, Ohio 43050
Belden Village Tower, Suite 200
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Canton, Ohio 44718
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Akron, OH 44313