During these uncertain times, it’s no wonder that many businesses are experiencing financial hardship. If your company is mired in debt for whatever reason, you may have considered bankruptcy to get rid of it. However, you may be wondering: will you be able to continue operating your business even after filing for bankruptcy? Answering that question will depend on the nature of your business and the type of bankruptcy you choose to file.
Before we talk about the types of bankruptcy that might help you, there are three factors to keep in mind if you want to keep your business after your filing.
Is it Making Any Money?
The main objective of any business is to generate profits. If this is not happening consistently, you might want to think about closing permanently and starting over. However, if your business usually generates substantial revenue and is simply experiencing temporary hardships, filing for bankruptcy may help you keep it afloat.
Assets and Liabilities
If your business assets are more valuable than your liabilities, and it is still consistently making money, then it makes sense to do everything you can to salvage it. Conversely, if your liabilities have outweighed your assets, saving it may be mission impossible.
Are You Liable for the Debts?
You may be personally liable for the debts of your business. In these cases, it may be wisest to keep it running until you can negotiate with your creditors or file for bankruptcy. Otherwise, your creditors may go after your personal assets to recover their money.
Chapter 7 Bankruptcy Could Help
Filing for Chapter 7 bankruptcy could help you protect your business, but it could also put it at risk, depending on some specific circumstances.
In short, Chapter 7 bankruptcy is a debt relief solution that will eliminate most of your business debts in a matter of months. To accomplish this, you will have to sell some of your company’s assets to pay your creditors.
Naturally, you won’t lose everything by filing this type of bankruptcy. You may be able to “exempt” certain assets from the process, which means that they won’t be affected in any way by it.
To protect your business through this type of bankruptcy, you will need to exempt either the company itself (especially if you are the sole proprietor), the business ownership interests (in case you own part of a corporation or LLC), or the assets essential to continue the business operations. If you want to know exactly how to do that, you should consult with a Chapter 7 bankruptcy attorney near you.
Now, it is worth keeping in mind that if any of these items are deemed non-exempt, you are likely to lose your business during your bankruptcy filing.
What about Chapter 13 Bankruptcy?
On the other hand, you may have a better chance of staying in business if you choose to file for Chapter 13 bankruptcy. Under this type of bankruptcy, you will have to pay your creditors through a 3-to-5-year repayment plan. However, you must prove that the company continues to generate enough income to comply with the plan. Furthermore, you should consider working with a bankruptcy attorney if you want to have a realistic chance of success.
Consider Chapter 11 Bankruptcy as Well
If you own a large business, Chapter 11 bankruptcy may be your best option to retain it. The specifics of this type of bankruptcy tend to vary depending on the business. However, in essence, it is similar to Chapter 13. You will need to create a repayment plan to pay your creditors while your business continues to operate as usual.
If you want to learn more about it, consult with a local business bankruptcy attorney.
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