Small businesses often go through difficult financial times. However, is it possible for the business owner to file bankruptcy? Bankruptcy can help in a couple of ways if the business is in debt. Bankruptcy is a tool to reorganize debts if the owner wants to keep the business. On the other hand, bankruptcy can be used to liquidate if the owner wants to close the business. The type of bankruptcy that needs to be filed depends on how much debt there is.
The owners of partnerships, corporations and LLC’s can file Chapter 7 on behalf of the business. The bankruptcy trustee sells the business assets to pay creditors. However, the owners are still personally responsible for business debt. Sole proprietors cannot file Chapter 7 on behalf of the business. The business is not a separate entity so the debts and assets belong to the owner. In this instance, the only way to eliminate business debt is to file personal bankruptcy. This method does benefit the owner because he or she is allowed to use exemptions to protect business assets. If you are thinking of Filing Bankruptcy in Colorado Springs, Contact David M. Koppa.
Sole proprietors can file Chapter 13 and include business and personal debts. The debtor gets to keep all of his or her assets and repay their debts. In addition, Chapter 11 is an option for those Filing Bankruptcy in Colorado Springs. Chapter 11 is known as a business reorganization bankruptcy. Businesses can file Chapter 11 and reorganize debt through a repayment plan. Unfortunately, Chapter 11 is complicated and expensive. Businesses have to file ongoing operating reports and a creditor’s committee will be appointed. However, if the business has less than $2.3 million worth of debt, it can be declared a “small business debtor,” and some of the extra requirements are removed. Chapter 11 and Chapter 13 are good alternatives for those who want to keep a business going during hard times. If you are in this position, schedule a consultation with a bankruptcy attorney.