Is Chapter 7 Bankruptcy Right for Your Business?
Deciding upon filing for bankruptcy for your business is a stressful and overwhelming experience for many. If you have been curious about Chapter 7 bankruptcy in Southfield and wonder if it is the right option for you, read on to learn more about how you can determine this.
No one who starts a business ever hopes to end up in bankruptcy court. However, sometimes it is inevitable, and if that’s your situation, take the time to ask yourself some important questions before you take the leap into bankruptcy.
Is Your Business Just Slow, Or Is It Over?
This will be a difficult question to ask yourself, but it is imperative you answer it honestly. Businesses can go through cycles, especially if the business is cyclical or seasonal. If your business is slow but still has customers and revenue, you should work with an accountant or financial planner to determine what financial strategies can keep you in business.
However, if you have found your business has lost customers, has little revenue, and no cash flow, it may be time to move on. If you don’t believe your business can recover, it is time to consider bankruptcy options, including Chapter 7 bankruptcy.
How Is Your Business Structured?
Most small businesses are either sole proprietorships, or set up as a corporation or a limited liability company (LLC). How your business is legally structured will determine whether you are personally responsible for any company debt.
If your business is a sole proprietorship, your business and you are one in the same. You are liable for any and all debts incurred by your company. If this is the case, your best choice would be a Chapter 7 bankruptcy, or possibly a Chapter 13 bankruptcy. A business bankruptcy attorney can help you make this determination.
Does Your Company Have Any Assets?
It’s important to take an inventory of company assets. If you file for Chapter 7, the bankruptcy court will liquidate all non-exempt assets to repay creditors. If you have a large amount of assets, you might want to consider alternatives to Chapter 7 because the assets could be restructured to keep you in business. If you are unsure which route to take, discuss your options with an experienced bankruptcy attorney.
If you have a very small business, bankruptcy might not even be necessary. There are ways to wind down the business slowly and prevent bankruptcy entirely. Again, this decision shouldn’t be made lightly, and the best way to prevent costly mistakes is to discuss your personal situation with a lawyer.
Have You Personally Guaranteed Any Debts?
Often small business owners obtain loans and credit cards in their own name for the purpose of the business. If this is the case, a Chapter 7 bankruptcy will allow for any liquidated funds to pay off these debts. However, remember that you may be responsible for any amount not covered in the bankruptcy.
Please contact us today to learn more!