If you own a small business, bankruptcy may help you.
What Are the Options in Bankruptcy for a Small Business?
Options are determined by how the business is set up (Corporation, sole proprietorship, LLC).
Bankruptcy options for controlling business debt
- Closing the business and starting fresh with a new smaller, more streamlined operation.
- Reorganizing the business and restructuring debt with Chapter 13 bankruptcy or Chapter 11 bankruptcy.
- Closing the business and getting forgiveness of personal guaranties with Chapter 7 bankruptcy.
Types of bankruptcy available
- Chapter 7 bankruptcy – Best option if you are closing your business. If the majority of your debt is business debt, you are exempt from the means test.
- Chapter 13 bankruptcy – Affordable debt reorganization if you have a sole proprietorship and want to stay in business. Corporations and LLC’s can’t file Chapter 13 bankruptcy.
- Small Business Act of 2019 – if you can’t qualify for the cheaper Chapter 13 bankruptcy, this may be an option. For a limited period under the new Coronavirus Act, this type of bankruptcy is available to individuals as well.
- Chapter 11 bankruptcy
- Chapter 12 bankruptcy – debt reorganization for farmers and fishermen.
Common Causes of Small Business Failure
Common Myths About Small Business Bankruptcy
We offer a free initial consultation for small businesses. You should consider requesting a consult when you believe bankruptcy is a real possibility. With business cases, you may need to do some extensive planning before filing. This can take time.