Bankruptcy is often thought of something individuals do when they have debt like credit cards, loans, and mortgage payments they can no longer keep up with. However, businesses also deal with debt they can't handle on their own. This is where business bankruptcy comes in. Here is more information about filing for this type of bankruptcy.
Is filing for bankruptcy your only option left?
Bankruptcy should be your last resort since it is not only a complicated process, but it puts a major hit on your credit history. It will take several years before it is removed from your credit report, during which your credit score will remain low and the bankruptcy is made public. Make sure this is the only option you have left. Consider whether you have contacted your creditors to try and work out a payment arrangement with them or if you can contact a credit counselor to help you manage your debt. Think about what is in your savings or retirement accounts and whether or not you can use that to help consolidate your debts. Also, consider whether you are responsible for the debts, such as if you have a partnership instead of being a sole proprietor. Also, think about the total amount of debt you have and whether in the near future you might be able to get a handle on it.
What are the different types of business bankruptcy?
You should also be aware that with business bankruptcy, there are a few different types of bankruptcy you can file. Chapter 7 and chapter 13 bankruptcy can be used for a business, as well as if you were filing as an individual. If you decide to file chapter 7, it will get rid of the majority of your debt, except for back taxes, but it also liquidates your business. This is what you should choose if your business is in such deep financial trouble that you are not interested in continuing with that business. Your business assets will be sold and used to pay your creditors. Chapter 13 is only an option if you operate your business as a sole proprietor, since it is for individual debts. This will allow you to come up with repayment plans with your creditors, so you can still keep your business. With chapter 11 bankruptcy, you are reorganizing your business and debts, also helping you to save your business and handle your debts.
What is the process for filing for bankruptcy?
If you are considering filing for bankruptcy, consider what type of business you have and whether you are personally liable for them. If you have partners or a board of directors, consult them to discuss whether you want to liquidate or reorganize your business. You will need to work with the local courts to apply for the right type of bankruptcy. Getting an attorney is highly recommended for any type of business bankruptcy filing.