If you are a small business owner and you are struggling in debt, you may consider exploring some options before declaring bankruptcy. There are different types of bankruptcy which can be appropriate for your small business.
The way you organize your business will make a big different when it comes to the working of bankruptcy. If it is organized as a partnership or a sole proprietorship, then, it will be considered as one and the same entity you and your partner. This means that your business bankruptcy could end up having an impact on your personal credit standing and assets.
This is an option for large businesses or businesses with huge amount of debt and assets. It’s quite rare for a small business to take advantage of this chapter as it only makes sense to businesses which are considered separate from their owners.
Chapter 13 is the best option when you are filing bankruptcy for a small business. You and your small business will be included in this kind of consumer bankruptcy filing. You assets cannot be sold in this chapter of bankruptcy, but you need to show that you have enough income which can allow you to repay a portion of the debts.
For self employed persons and sole proprietors, you are required to track your income for past 6 months leading to the bankruptcy and have other documentations including your tax return which shows your earning capacity.
If you have no income to repay your debts, this is the best option for you. You will be required prove that you are not able to pay for your debts due to insufficient income and assets. A lot of your assets are required to be sold in this chapter so as to generate enough money for repaying creditors. It can be hard for your business to continue due to this huge sale of assets.
Remember, to a hire an attorney if you think you may file or you are filing bankruptcy for a small business.