For a business filing bankruptcy, there are a few options. You should consult with a business bankruptcy lawyer to ensure that you are selecting the right option for your business, kind of business, amount of business debt and whether or not your business would be viable once it emerges from the bankruptcy.
No doubt, this is a tough economy, and many small business are struggling. However, with the right business bankruptcy attorney, you may be able to save your business and continue to live the dream of being a small business owner.
Small businesses can sometimes have difficulty in succeeding in the global competitive market. They can sometimes face financial problems and filing for small business bankruptcy may seem the solution. However, before filing, business owners should know what type to file.
There are three bankruptcy types that business owners can file depending on the type of business they have.
First, Chapter 7 bankruptcy or liquidation: This is the best choice for businesses having no possible future. This can be filed by sole proprietorships, wherein the owner is responsible for all assets and liabilities of the firm, and corporations and partnerships, which have legal entities separated from the owner. This is also filed when a company has too many debts that restructuring is not possible or if the company does not have any substantial assets. For small business bankruptcy, this type could mean that the business is over.
With liquidation, a trustee is appointed to take possession of the assets of the business and distribute them among the creditors. The sole proprietor then receives a discharge or is released from any debt obligations at the end of the case.
Second, Chapter 11 bankruptcy: this is best suited for companies, which still have a possible future. Sole proprietorships, and corporations and partnerships can file this. But this is complex and success is sometimes minimal.
For small business bankruptcy, this type means the company plans for reorganization and continuation of the business. Nevertheless, reorganization is done under a court appointed trustee, the owner of the company, and will be shown to creditors. Creditors will vote on and approve the plan. The plan will provide a period for the company to pay their creditors. However, confirmation can sometimes take a year to finalize.
Third, Chapter 13 bankruptcy: this is usually reserved for consumers. However, this can also be filed by sole proprietorship. Small business bankruptcy of this type entails the firm to submit a repayment plan stating how the company will repay the debts. Repayment depends on earnings, debts and property ownerships. Filing this type could save the owner from losing personal assets.
Small business bankruptcy can be a solution to a company’s debt but before deciding to file, consult an attorney first. They can recommend the type to file and might even recommend other options that will help save your company without filing.
Author: Naomi Smith
Article Source: http://EzineArticles.com/?expert=Naomi_Smith
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