I often get calls from people who want to know if I can help them file bankruptcy for their business. After trying their best, for one reason or another their business plan just didn’t work out. Maybe they didn’t have enough capital. Maybe their household couldn’t survive on one income while the business got up and running. Whatever the reason, they want to know if the can declare bankruptcy to get out from under the debt for the business.
As a general rule, it’s fairly unusual for most small businesses to file bankruptcy. In most cases, the business’s debts far outweigh the business’s assets. If creditors were to try to collect the debt from the business, they wouldn’t get anything from the business. There just isn’t any practical reason for the business to file bankruptcy. The one reason a business might want to file bankruptcy is if it has a great deal of inventory or property that it needs to get rid of to satisfy its creditors. Some business owners will file bankruptcy in that case to let the bankruptcy trustee deal with the distribution of these things.
Just because there might not be a reason for the business to file bankruptcy, that doesn’t mean that the business owner doesn’t need to file bankruptcy.
Most lenders or landlords for small businesses will only extend credit or enter into contracts for a small business if the owner signs a personal guarantee for the business. What that means is that even if the business shuts down, the lender or landlord can still pursue the owner to collect the debt. If that’s the case, then the owner may need to consider Chapter 7 or Chapter 13 bankruptcy. The good news is that most business related debts, even loans from the Small Business Administration, can be eliminated in bankruptcy. Keep in mind that SBA loans are sometimes secured by the business owner’s residence.
Of course, if the owner has to file bankruptcy that creates other questions related to their non-business debt, assets, and how bankruptcy might affect their spouse.
We can answer all of your questions during an initial consultation. Our job is to get you through the bankruptcy process as quickly and safely as possible.
More helpful articles:
Will Bankruptcy Get Rid Of All My Debts?
Will I Be Able To Get Credit After I File Bankruptcy?
Can I Repay My Debts Even If I File Bankruptcy?