Understanding Your Business Bankruptcy Options
If your small business is having trouble paying the bills, it is important to make sure you know your options. Some small business owners make the mistake of assuming that their only choice is to declare bankruptcy and go out of business, but this should be a last resort. In fact, it’s a common misconception that bankruptcy automatically means shutting down the business. Read on to learn more about your options from your local Southfield bankruptcy attorney. Keep in mind every business is unique and the best course of action is to meet with one of our attorneys for a personalized evaluation.
The following are key options within bankruptcy that can help you to get through your financial challenges. They will also help you to position your business in such a way that you can come out of bankruptcy without having to close the business down.
Selecting the Type of Bankruptcy
For most small businesses, there are four main types of bankruptcy that can be considered. Understanding the benefits and obligations of each can help you to pick the one that is best for your specific situation. The options are:
- Chapter 7 Bankruptcy – With this option you will liquidate any assets to pay the debts, and any that remain unpaid will be discharged. In most cases, when this option is chosen the business also needs to be closed up since all the assets will be gone.
- Chapter 11 Bankruptcy – If you want to be able to keep your business open after the bankruptcy, Chapter 11 may be a better choice. This type of bankruptcy is primarily a restructuring of the debts so that your small business will have the ability to pay them. After the bankruptcy is completed, your business will likely have a court appointed trustee to scrutinize the business for a set amount of time.
- Chapter 12 Bankruptcy – Chapter 12 is only an option if you own a family farm or family fishing company. If that is the case, it can help you to create a repayment plan that lasts between three and five years.
- Chapter 13 Bankruptcy – This is an option that is more commonly used by individuals, but some businesses can use it as well. It allows you to create a repayment plan that works for your business, and can reduce or eliminate interest in some cases. This is a good option if you have personal assets tied in with business assets.
Taking the time to understand the pros and cons of each of these options is very important. If you aren’t sure which one is right in your particular situation, give us a call – we look forward to assisting! Contact your local Southfield bankruptcy attorney today.