Filing Business Bankruptcy

Written by jessica Alba

Bankruptcy is meant for the individual to get a fresh start, whether it is a personal or business bankruptcy. But, there are new and different laws that apply. So, especially if you are thinking about filing business bankruptcy, heads up. Even before your thoughts have a chance to come to fruition, hire a lawyer. You have a lot to consider.

For example, are you the sole proprietor, or do you have a partner(s) that will be affected by your actions? How will bankruptcy affect your future as a businessperson? Do you have any other options open to you, so you do not have to take such a drastic step that will adversely affect your credit for years to come? Filing business bankruptcy should be the option of last resort, if you want to save your spending power in the future. So, you need to consider the following questions, before you go any further.

Can Bankruptcy be a Good Decision?

Although it is not a decision to be taken lightly, small business bankruptcy may be the only option to get the monkey off your back. In other words, once you file for bankruptcy, creditors cannot hassle you for money until the court makes a decision whether you qualify for bankruptcy relief or not. Even if the decision does not go in your favor, it may buy you some time to get your financial cards in order. You will definitely need the services of a bankruptcy lawyer to help you circumvent all of the legal red tape. If you try to get through all f the legalities on your own, it could be more costly in the end, and get you into more legal trouble, if you make the wrong move.

How to Pay for a Bankruptcy Lawyer?

You are already in financial straits and now you need to hire a bankruptcy lawyer. If you cannot get yourself out of the hot seat, how can you afford a lawyer? Unfortunately, a bankruptcy lawyer will require money up front. You will probably have to find the money in a payment that you were going to make to your creditors. It will not be easy. But, you cannot afford to go to federal bankruptcy court without a lawyer. It will ultimately cost you more than paying a professional representative. Some may even use the term ‘foolhardy’ to describe those that try to go it alone.

What are my Bankruptcy Choices?

Whether you are the sole proprietor or you have a partner, you are not without choices, with respect to filing bankruptcy. However, before you decide, you need to understand that sole proprietorship is basically the same as filing personal bankruptcy. In the eyes of the law, you are your business.

Also, if you have a partner, your decision to file bankruptcy may also force your partner to do the same. So, you decision will definitely affect more than you and your family. Thus, it should be a decision that you come to together, if at all possible.

With that in mind, you can decide to get a clean slate and file chapter 7 bankruptcy. Under this option, your business will have to close, and the courts will have to determine all of your assets versus your liabilities, if you are the sole owner. If you have one or more partners, it will definitely be more complicated; because the court will have to assess what part of the debts are your responsibility. Hopefully, you have documented everything that has transpired with the business.

If you opt to file chapter 13 bankruptcy, it may give you a chance to restructure your debt, and ultimately save the business. In many cases, the proprietor(s) will eventually have to convert to a chapter 7. But, others have managed to get out of debt, build up their business, and ultimately see their business become a profitable enterprise.

Should you have debt over $260,525, you will have to file chapter 11 bankruptcy. It is basically the same as chapter 13, but it is determined by the amount owed to creditors.

Finally, if you are a farmer, you will have to become familiar with chapter 12. If you want to save your farm, it is modeled after chapter 13, in that you can pay your creditors by using your future income.

Of course, there are more questions that will have to be answered before you file for business bankruptcy. Now you know why it is imperative to find a way to hire a bankruptcy lawyer. With all of the changes in the law, and so many legal details to remember, it is simply too risky for you to go it alone. Your future is at stake. The point of bankruptcy is to give you a fresh start, not make matters even more difficult. So, before you take that leap, make sure you know exactly how far you are going to have to jump.