If you are a small business owner who is struggling to stay afloat, there are bankruptcy options that may help you get back on your feet. Depending on your business structure, debts, and assets, there are three versions of bankruptcy that may provide some relief and allow you to move forward in a positive way. First of all, it’s important to clarify that if you are a sole proprietor or general partner in a company partnership, you are held liable for the company’s obligations. However, if you are a limited partner, or if your company is registered as an LLC, you may not be personally liable for the business finances. If you aren’t sure where you stand, it’s best to talk to a qualified bankruptcy attorney in Atlanta before you consider filing.
There are three different types of bankruptcy, Chapter 7, 11, and 13, and each carries their own benefits and drawbacks. Your individual company and circumstances will likely make one type better than the others, but here is a basic overview of the three kinds of bankruptcy filings, and how they affect small businesses.
You may file a Chapter 7 bankruptcy as an individual, or on behalf of your partnership, corporation, or LLC. The idea of this type of bankruptcy is to shut down and liquidate the business, which can be a good option for people looking to move on from their entrepreneurial attempts and get a fresh start. In these cases, the trustee can sell your business assets to pay off the creditors, but remember that this filing does not discharge your personal debts to the business.
You may only file a Chapter 13 bankruptcy as an individual, not as a corporation, partnership, or LLC. However, for sole proprietors, the business and the individual are one in the same, and the business debts will be included in the bankruptcy filing. Since this type of filing allows you to hold on to your assets and negotiate payment plans to reduce your debts, it’s often a good option for sole proprietors with valuable assets.
Both individuals and businesses may file a Chapter 11 bankruptcy, however, it is much more complicated than the above two options. Chapter 11 is designed for business reorganization, and for the business to remain open while repaying its debts. Depending on your company’s debt and revenue, you may be classified as a “small business debtor,” however, you’ll still be subject to the complex paperwork this filing requires.
If you own a small business and would like to talk to an experienced bankruptcy attorney in Atlanta, give our office a call. We are here to help.