Bankruptcy Lawyer Bryan W. Stone answers the question: “What is a small business bankruptcy ?”
Bankruptcy is stressful for anyone who has ever contemplated it. This is even more the case for those who own and operate businesses. Small business owners have to worry about how their financial struggles and potential insolvency could impact not only their personal assets and financial wellbeing, but also how it could impact their ability to earn an income in the future. Small business owners have the added burden of being responsible for the welfare of their employees, something that can heighten an already stressful ordeal.
If you’re a small business owner and your company is no longer able to pay its obligations based on income, bankruptcy may be something to consider. The reality is that you may already be insolvent given the technical definition, which occurs when your debts exceed your ability to repay them. Bankruptcy can offer you a way out of this trap, either by forgiving debts or allowing you breathing room and an opportunity to restructure. Though bankruptcy may mean the end of your company, that certainly does not have to be the case, in fact, bankruptcy might be exactly what your company needs to finally thrive.
What types of bankruptcy can a small business owner consider? Sole proprietors can consider filing for a Chapter 7 bankruptcy, which can include both your business and personal debts. The good news is that this will allow all your debts to be wiped out without requiring you to participate in a payment plan for years to come. The downside is that your assets, including both business and personal, also become part of the bankruptcy estate unless they are specifically exempted. This means that a trustee might liquidate (or sell) these assets to collect more money for your creditors.
Another option if you’re a small business owner is to consider a Chapter 13 or Chapter 11 bankruptcy. These both require payment plans and can be very good tools in cases where you don’t qualify for a Chapter 7, but are in need of relief from creditors. These are also good options when you want to keep your business open, but need help restructuring some of your debt. If your company is able to earn money and could thrive if debts were reduced to a more manageable level, a Chapter 11 or 13 bankruptcy is a good way of giving your company a chance to succeed.
How do you know when it’s time to seriously consider moving forward with a bankruptcy filing? First, if your personal assets become at risk due to business debts, filing for bankruptcy might be a good idea. If you’re a sole proprietor, you must keep in mind that you are personally liable for the debts of your company and, if those start to mount, you should seriously consider taking action before they begin to threaten your personal assets, such as a home or savings. Second, you should consider bankruptcy if your business is viable, but drowning under a sea of mounting debts. A bankruptcy with a payment plan can serve as an opportunity to regroup and get your company on the right track. Finally, bankruptcy may be worth considering if your business is clearly not viable. If all you are doing is amassing even more debt and don’t see a light at the end of the tunnel, there is no reason to continue digging even deeper into a hole. Bankruptcy can stop the bleeding and allow you to move on to other, more profitable, opportunities.
If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.
About the Author
Kyle Frost joined Arnold & Smith, PLLC in 2013 where he focuses his practice on all aspects of civil litigation and bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.
Born and raised in upstate New York, Mr. Frost attended the University at Albany on a Presidential Scholarship, graduating magna cum laude with a double major in Political Science and Sociology. He went on to attended Wake Forest University School of Law in Winston Salem, North Carolina.
Following college, Mr. Frost spent over a year teaching English in South Korea. He worked in a private school in Seoul developing curriculum, English programs, and educating both children and adults that were interested in learning a new language.
In his spare time, Mr. Frost enjoys homebrewing, fishing, and travelling.
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