Small Business Owners Considering Filing for Bankruptcy

Legal Tips & Resources

If you are a business owner who is struggling to pay your debts, you may be wondering whether your financial challenges will be the end of your business. Sometimes cash flow issues with a business are only temporary. However, in some situations, you may be unable to recover from the financial problems you may be facing. If this is the case, it may be in your best interest to consider filing for bankruptcy with the guidance of a bankruptcy lawyer. Here are some answers to common questions that business owners may have regarding bankruptcy: 

Is bankruptcy the end of my business?

Not necessarily. Sometimes, bankruptcy may give your business the opportunity to continue operations. Your lawyer can help you to make key decisions to determine the type of bankruptcy to file and whether keeping your business open is appropriate. Here are some factors to consider:

  • If your personal assets are at risk, it may be in your best interest to keep your business running while you sort out the debts you owe your creditors.
  • Is your business able to turn a profit? If your business is making money, or only impacted temporarily, it may be appropriate to keep your doors open. However, if your business is struggling, continuing to keep your doors open may not be the best option financially.
  • If you are still bringing in money and your assets are greater than your liabilities, you may have the ability to reorganize your debt and potentially save your business.

How might my personal assets be impacted if I file for bankruptcy?

When you start your own business, you take a significant financial risk. If your business is financially struggling, you may be wondering whether you should file for bankruptcy and whether or not your personal assets are at risk. Whether your personal assets are at risk will largely depend on the type of business structure that you form. If you are a sole proprietor filing for bankruptcy, your personal and business debts go hand in hand. You will likely file for Chapter 7 or Chapter 13. However, even if you are the owner of a partnership or LLC, your personal assets could be at risk. For help, speak with a bankruptcy lawyer.

What type of bankruptcy will allow me to keep my business open?

If it makes sense for your business to remain open, Chapter 13 may allow you to keep your doors open. Chapter 13 will allow you to enter a repayment plan and protect your business and its assets. However, before making the decision to keep your doors open, you will want to ensure that it makes financial sense to continue operating your business. 

Where do I begin the process of filing for bankruptcy?

When filing for bankruptcy, there will be much to consider. Because of this, you will want to start with contacting a bankruptcy lawyer to help you navigate the process. You may need to engage in credit counseling prior to filing for bankruptcy. Once you have completed bankruptcy counseling, your lawyer will help you file your bankruptcy with the court.  

Small business owners pour everything they have into their business, hoping that eventually they will be able to obtain success. Unfortunately for some, bankruptcy may be a necessary option to consider. For more information, contact a lawyer who can help you to determine whether pursuing bankruptcy is in your best interest.