As a small business owner, you wanted your business to succeed. However, with the dip in the economy and changes in how you had to run your business, there doesn’t seem to be a way to move forward.
If you’re ready to shut your doors for good and to get your finances back into balance, it’s time to look into a Chapter 7 bankruptcy. Chapter 7 bankruptcy, liquidation bankruptcy, is designed to help you pay back what you owe by selling off your nonexempt assets. Then, any remaining debts are discharged.
What happens to a business when the owner files for Chapter 7 bankruptcy?
When the owner of a business files a Chapter 7 bankruptcy, the business shuts down. At that point, the business is liquidated. For example, if you run a clothing business, then the clothing, racks, registers and other items may be sold to the highest bidders or to customers in the business’s last days.
This is a good option for business owners who want to shut down and not negotiate with creditors to try to consolidate or rearrange their debts.
Can you eliminate your own personal debts at the same time as your business bankruptcy?
It depends. If you are running a sole proprietorship, then the business’s assets are your assets, just as its debts are your debts. So, in that case, you will want to file for a personal bankruptcy and include all of your debts from the business and your personal life.
If you run an LLC or corporation, then the answer to this question changes. Since the LLC or corporation is a separate entity, your personal assets and debts won’t be affected by a business bankruptcy. You do have the option of filing for both kinds of bankruptcy, one personal and one for business, if your business is held as a separate entity.
Bankruptcy can be confusing, especially if you have a business that is intermingled with your own personal finances. It’s a good idea to talk to your attorney about your options to determine which type of bankruptcy will be right for you moving forward.