A good number of the clients with whom we’ve worked here at The Law Office of Paul Petrillo have come to us with their business in a state of financial ruin. If your small business has been engulfed by debt and bankruptcy appears to be your only option, you may be wondering which type of bankruptcy to file. The answer to that depends largely on the corporate structure of your business, as well as your plans for the future.
The Association of Credit and Collection Professionals reported that last year, 34,455 commercial bankruptcies were filed in the U.S. So know that you aren’t alone in your struggles. If you are planning on leaving your struggling business behind altogether and start fresh, a Chapter 7 bankruptcy may be the way that you want to go. In such a case, your qualifying assets are sold to pay off your creditors, and you are free to walk away from the company.
However, if you still retain a significant amount of assets, and you hope to remain in business after resolving your debt issues, then you may want to consider a Chapter 13. In this type of bankruptcy case, you work with the court to create a repayment plan. You are then protected from further collection efforts from your creditors during the duration of your bankruptcy case.
There are certain restrictions with filing a Chapter 13, however. You cannot owe more than a certain amount in either secured or unsecured business debt, and you must be sole proprietor. If you still want to remain in business yet are excluded from filing a Chapter 13 bankruptcy by these restrictions, then a Chapter 11 may be your only option.
More information of filing for bankruptcy for your business can be found on our site.