Chapter 7 Bankruptcy
United States Bankruptcy law allows both individuals and businesses to file Chapter 7 bankruptcy. Small business owners can file Chapter 7 bankruptcy on behalf of themselves or their business. The only exception is if you are a sole proprietor, as then your business and personal debts are taken care of in one single Chapter 7 bankruptcy case.
If you file Chapter 7 bankruptcy on behalf of your small business, it will not eliminate your business's debts. For this reason, many small business owners prefer to file an individual bankruptcy so that their personal legal obligations to pay the business debt are gone.
How You Can Benefit from a Chapter 7 Bankruptcy as a Small Business Owner
When you meet with a small business bankruptcy lawyer, they can help you explore the benefits of filing Chapter 7 bankruptcy. For example, if your business debts amount to more than your personal debts, you will not be held to the income requirements in the Chapter 7 means test.
Bankruptcy exemptions can be used to protect both your personal and business assets if you are a sole proprietor. If your family business does not have or need a lot of inventory or equipment, you will likely be able to continue running your business after your business debts are discharged through Chapter 7 bankruptcy. However, if you cannot exempt all of your business inventory or equipment that you need to keep your business alive, your Chapter 7 trustee is required to sell your nonexempt assets. Depending on the types and amounts of your business assets, this alone could put you out of business. Keep in mind, however, that if it does, you are still relieved of most or all of your personal and business debts.
If your small family business is a corporation or limited liability company (LLC), this type of bankruptcy gives you a transparent way to close down and liquidate your business. Filing Chapter 7 on behalf of your business makes it the responsibility of the trustee to sell the business assets to pay its creditors. Then you are free to seek other employment or get involved in other ventures.
It’s important to note that partnerships do not usually benefit from Chapter 7 bankruptcy. In this situation, the trustee can pay the partnership’s debt with the personal assets of the partners. There are other drawbacks to small business Chapter 7 bankruptcies.
Contact a California Small Business Bankruptcy Lawyer Today
If it’s unlikely that the financial situation of your small family business will substantially improve soon on its own, the best thing you can do is to reach out to an experienced California small business bankruptcy attorney today. Your attorney will assess the financial status of your business and help determine the steps that will result in the most favorable outcome to your case. By taking this step, you are taking control of your situation and moving towards financial security.
Your California small business bankruptcy lawyer can explain more about your bankruptcy options, as well as their benefits and drawbacks in your individual personal or business situation.
Schedule your family business bankruptcy consultation by emailing This email address is being protected from spambots. You need JavaScript enabled to view it. or calling (408) 909-0125 today. We want to help you achieve a brighter financial future and find success in whatever you might aspire to do.