If you are a business owner and your business is struggling financially in this difficult economic climate, you should speak to an experienced bankruptcy attorney to review your options.
The first question a bankruptcy attorney will ask you is: How is your business organized? Are you a sole proprietorship (you file a Schedule C for the business on your personal taxes), a Corporation, an LLC or a Partnership?
If your business is organized as a Corporation, an LLC or a Partnership, these types of corporate forms are considered “a person” or separate “legal entities” that would file bankruptcy in their own name, not your individual name. These entities may file either a Chapter 7 bankruptcy (called a liquidation) or a Chapter 11 bankruptcy (called a reorganization).
If your business is a sole proprietorship, or if you have signed “personal guarantees” on any business debts for a Corporation, LLC, or Partnership, you might consider filing a personal Chapter 7 bankruptcy to eliminate your debt, or a personal Chapter 13 bankruptcy to consolidate your debt.
Chapter 11 bankruptcy is also available to a sole proprietorship and may be useful if you have a large amount of debt that exceeds the debt limits of Chapter 13. It is common for banks and other lenders to insist on personal guarantees when loaning a business money, or providing equipment or supplies.
Accordingly, the attorney’s fees you will pay will be substantially higher and will require significant time on the part of the owners to comply with the requirements of the bankruptcy system. A creditor committee and a Bankruptcy Judge must approve a Chapter 11 plan. Unfortunately, most reorganizations fail because the business cannot return to profitability or provide a plan approved by the creditors and the Judge.
Personal vs. Business Bankruptcy
Many clients ask whether they need to file both a personal bankruptcy and a business bankruptcy. Usually, no. If the business is no longer operating and/or has no assets to pay its creditors, then filing a personal bankruptcy for any personal guarantees would suffice.
I have personally counseled and advised numerous small businesses, including construction companies, retail stores, service providers such as hairstylists, nail salons, painters and real estate agents, and so on. Feel free to contact my office to preemptively discuss your small business financial difficulties before negative collection activity begins.
Collection methods may include judgments and liens against personal or business assets such as wages, bank accounts or equipment. You may also face repossession of equipment or vehicles that you leased or have been making payments on under a sales contract.
You may face home foreclosure if you used your home as collateral for a business loan. Or your commercial landlord may evict you for nonpayment. Don’t delay, call the law office of Becky A. Moshier, Attorney at Law to discuss your financial options.
For a more detailed explanation of how Small Business Bankruptcy can help you build a more stable financial, future, let’s schedule a consultation today.
Moshier Law Office, PLLC
St. Paul, Minnesota