Can I Keep My Business While Filing for Bankruptcy?
As a business owner, your business is important to you. Many business owners don’t realize they may be able to continue operating their business while seeking bankruptcy relief. If you are a business owner struggling to pay your vendors and facing insurmountable debts, you may need to consider bankruptcy to regain control of your finances.
Bankruptcy is a legal tool to help businesses and individuals make a fresh start. Filing for bankruptcy doesn’t necessarily mean losing your business. A knowledgeable bankruptcy attorney can help you evaluate whether your financial situation allows you to file bankruptcy and keep your business. There is no charge to explore your options.
Types of Bankruptcy and How It Can Affect Your Business
When you consider filing for bankruptcy, your first thought may be of a cessation of operations and liquidation of assets. But the federal bankruptcy code contains other viable options that you may consider if your goal is to keep the business you’ve worked hard to build.
Businesses typically use Chapter 11 to reorganize. Most businesses, including limited liability corporations, partnerships, and joint ventures, can continue operation during a Chapter 11 bankruptcy. The business can operate while it develops a repayment plan to satisfy its creditors. If the court approves the repayment plan, the business can operate and will have up to five years to satisfy the terms of the confirmed plan.
The Small Business Reorganization Act of 2019, passed by Congress, made a Chapter 11 filing more affordable for small businesses.
Individuals are eligible to file Chapter 11 in addition to registered entities.
Chapter 13 bankruptcy helps sole proprietors of businesses restructure their debt and develop a repayment plan if they have a steady income to pay off debt. Sole proprietors can continue operating their businesses and avoid the liquidation of their business assets in a Chapter 13 bankruptcy. If you believe your business can still be viable and wish to avoid liquidation, you may want to consider Chapter 13.
A Chapter 13 filing may also be appropriate if you own all or part of a limited liability company or a corporation and do not wish to expose that ownership interest to liquidation.
Businesses such as limited liability companies and corporations cannot file Chapter 13 bankruptcy.
Chapter 7 bankruptcy typically applies to individuals and businesses with debts so large compared to their income that a repayment plan is not feasible. In Chapter 7 bankruptcy, a trustee is appointed to determine various issues including if a liquidation of assets is appropriate. Here are some possible outcomes in Chapter 7 bankruptcy based on the type of business you operate:
- Sole proprietorship – Sole proprietors in service-oriented businesses are more likely to keep their business than product-oriented ones. However, the trustee may elect to shut down and/or sell a business if there is value to be obtained by assets such as accounts receivable, bank account deposits, causes of action, tangible assets, intangible assets, etc.
- Limited liability corporations (LLCs) or corporations – In the case of LLCs and corporations, the trustee will shut down the business and may liquidate assets to pay the company’s debts.
Will multiple bankruptcy filings be necessary and/or appropriate.
Because many business people have overlap in their own personal liability and the debt of a registered entity they own, it is sometimes advisable, depending on the facts, for both the individual to file a case as well as the incorporated entity.
Contact an Experienced Bankruptcy Lawyer Today
It can be helpful to consult with a knowledgeable bankruptcy attorney who can provide guidance based on a review of the financial situation of your business. The bankruptcy lawyers at Sasser Law Firm have filed more than 10,000 cases and may be able to assist you. Contact Sasser Law Firm today at (919) 319-7400.
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For more than 20 years, the Sasser Law Firm has been helping individuals and business owners sort through financial hardships to see the light at the end of the tunnel. Our North Carolina bankruptcy attorneys are all board-certified specialists, which means we have passed a complex exam, undergone a thorough peer review, and continue to earn legal education credits in this ever-evolving area of law.