During the past few years, more and more Americans have taken steps to find new ways to generate an income. A lot of these individuals have gotten creative and this has led to an explosion in new businesses throughout the country.
Nevertheless, it is important to realize the everyone is vulnerable to financial struggles and this includes small business owners. As a small business owner, you must understand that a personal bankruptcy will have far reaching repercussions and it could negatively impact your small business. Within this guide, you will learn about the potential impact a personal bankruptcy will have on your small business.
The unfortunate truth is that a personal bankruptcy will definitely consider your ownership interest in your small business. However, it should be known that the impacts will depend on a handful of factors, including the way the bankruptcy is filed and the way the business was initially set up. Choosing between a Chapter 7 and Chapter 13 bankruptcy will be enormously important for the sake of your future and the future of your business.
If you agree to file a Chapter 13 bankruptcy, you will be forced to follow a repayment plan for a specified period of time. Your business assets and income could be affected. If you’ve structured your small business as an LLC or corporation, the risks are minimized. With these types of business structures, the business will normally be independent of the owner. If your business is considered a sole proprietorship, it will remain closely connected to you and it could be put in jeopardy during a Chapter 13 bankruptcy. However, it is important to realize that the specific laws governing bankruptcies will vary from state to state.
Regardless of the type of bankruptcy format you choose, it is pertinent to hire a great personal bankruptcy lawyer to ensure your assets are protected to the fullest.
Chapter 7 Filing
In a Chapter 7 bankruptcy, your business will also be put in danger. In this type of proceeding, the assets of the owner will be examined and sold off in an attempt to repay the creditors. In general, the business will only be impacted if it has a positive value and could potentially be sold to repay the creditor.
Less Financial Means To Grow
If you are one of the few that is able to keep their business up and running after bankruptcy, you will probably find it extremely difficult, if not impossible to grow. A bankruptcy can be crippling for any company and for one to survive afterward is just amazing. If your business is able to survive there will be no doubt a lot of barriers to overcome. First of all, you will not have the financial means to support expanding into other markets.
If you are interested in keeping your business, you will need to file Chapter 7 bankruptcy, which does not separate the owner from their business. However, if you are in a partnership with someone else, the trustee will have the right to liquidate your business assets.
In any type of bankruptcy filing, the business and assets will be sold, if there is not enough money available to pay off the creditors. The end game will decide the fate of your business, so take very careful measures to choose the perfect bankruptcy filing for you.