Almost everyone is aware that individuals who are struggling financially can seek relief by filing for personal bankruptcy under the United States Bankruptcy Code. Additionally, headlines regularly feature huge corporations, such as General Motors or American Airlines, that have filed for bankruptcy due to significant losses. However, many small business owners often wonder how bankruptcy may apply to them if their business is in financial trouble.
There are several different options for small business owners, and the right option for you will depend on certain factors, such as the type of business entity you own, the amount of debt your business has, and whether or not you wish to continue operations or liquidate your business. The following information briefly explains some of the bankruptcy types available to small business owners.
Chapter 7 bankruptcy may be helpful no matter what type of business entity you have. If you have a sole proprietorship, you are personally liable for your business debts, so you must file for personal bankruptcy to discharge those debts. If you have a corporation, limited liability company, or partnership, you can file for Chapter 7 on behalf of the business. Chapter 7, however, is generally used to liquidate and close a business.
Business entities can file for Chapter 11 bankruptcy, and this type of filing is primarily for business owners who wish to remain in operation and reorganize the business debts into a manageable payment plan. This kind of bankruptcy may be complex and costly, though if your business has lower debts, the process may be simpler and faster.
Businesses may not file under Chapter 13, however owners of sole proprietorships and owners of corporations may file on a personal bankruptcy. This type of bankruptcy allows you to retain ownership of your business.
Contact an experienced Phoenix bankruptcy lawyer for a free consultation
Whether you are considering bankruptcy to help with your personal finances, your small business finances, or both, the committed bankruptcy team at Ellett Law Offices, PC can advise you of which debt relief option is best for your situation. Please contact our office at (602) 235-9510 to schedule your free consultation today.