Many small businesses are having a hard time staying afloat in the U.S. The cost of operating a business is increasing and there is competition from larger operations. Some businesses opt to close and hold liquidation sales. However, this may not be a viable option if the business has a lot of debt. In addition, sole proprietors are personally liable for business debt while owners of corporations and LLC’s are not. Some choose to file bankruptcy to reorganize their debt. Additionally, the business remains open and they can continue to make money.
Owners should consult with Business Bankruptcy Lawyers before making a decision. They are able to ascertain whether bankruptcy will help. Chapter 7 bankruptcy is often used by corporations who want to liquidate assets and pay off company debt. Sole proprietors must file a personal Chapter 7. There are some advantages, filers are able to wipe out personal and business debt. Some assets may be exempt from liquidation and the business can continue operating. Sole proprietors are also able to file Chapter 13. Business and personal debts are lumped together in one bankruptcy plan. The debtor is able to keep their property and reorganize debts through a payment plan. Experts say Chapter 13 is a good choice for those with lots of assets.
Chapter 11 is the most common type of business bankruptcy. It is similar to a Chapter 13 for individuals in that debt is reorganized and a monthly payment is made. However, Chapter 11 payments are higher and there is ongoing paperwork. Business Bankruptcy Lawyers advise that the bankruptcy trustee will want to see regular operating reports. Additionally, a creditor’s committee is formed and they have to approve any plan before it is confirmed. If a business has less than $2.3 million in debt, it is classified as a small business and the Chapter 11 is easier. It is unusual for individuals to file Chapter 11. However, it is possible if they owe more than $1.3 million dollars in secured and unsecured debt. It is good to know there are options for businesses. Consult a lawyer and start making plans today. Or Click Here for more info.
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