Bankruptcy in business or as an individual can be an overwhelming process, but it doesn’t have to be. The Lee Law Firm believes that every consumer and business owner should be able to learn about the process and take an active role in finding relief from their debts, which is why we developed this list of Frequently Asked Questions.
My Business Is Failing, Can Bankruptcy Help?
Yes. Filing for bankruptcy as a business can help alleviate your company’s overwhelming debt burden. A business Chapter 7 can provide total debt elimination through asset liquidation, while a Chapter 11 bankruptcy can help your company reorganize its debts and regain control over a financially solid future.
Can I File For Bankruptcy For My Business Only?
Absolutely. In fact, our law firm recommends filing for bankruptcy as a business separately from your personal matters. Most of the time people find that they do not need to file a personal bankruptcy case and a business bankruptcy is sufficient to resolve their debt problems.
Can I Discharge SBA Loans In Bankruptcy?
Yes. Small Business Administration (SBA) loans are government funded loans given to business owners for the purposes of start up costs. Defaulting on an SBA loan can be problematic under certain situations, such as if there is more than one co-signer or any assets was secured as collateral. In either case, an SBA loan can be discharged through a business Chapter 7, but will most likely result in a portion of the assets going towards repaying some of the loan debt. The SBA loan may also be discharged in a Chapter 11 case, in which the company continues to make payments towards the loan as part of their Chapter 11 repayment plan.
What Happens To The Personally Guaranteed Business Loans?
Personally guaranteed business loans can also be discharged in bankruptcy. However, they are handled a bit differently and also may complicate the process. The reason is that a personally guaranteed business loan is secured against one’s personal credit history, which means that defaulting on the business loan leads to damage of the person’s personal credit standing. This also means that if the bankruptcy court orders asset liquidation for purposes of satisfying the debt repayments, some of the business owners personal property may be at risk.
Can I Continue To Operate My Business If I File Personal Bankruptcy?
In most cases, yes. A personal bankruptcy rarely interferes with business operations. A business is considered an asset, which will be required to be listed in the personal bankruptcy filing. If any assets are liquidated during the personal bankruptcy case, the business may not be 100 percent safe from creditors. However, the bankruptcy court rarely allows for businesses to be liquidated as they recognize this may be the individual’s only mechanism for employment and income.
What Happens To The Assets Of The Business?
It depends. In a business Chapter 7 case, the assets will be liquidated and profits divided among creditors. In a Chapter 11 case, assets are generally left alone during the debt repayment process. In some Chapter 11 cases, the court may allow for some of the assets to be sold to third parties for purposes of satisfying the debt payments.
Is It Better To File For Bankruptcy Or Dissolve My Business?
If you are at the point of deciding between a total dissolution of your company or filing for a business bankruptcy, bankruptcy is your better option. Filing for business bankruptcy will help you resolve your debt troubles and obtain a debt satisfaction status with creditors. If you simply dissolve your business without filing for bankruptcy, creditors will be free to continue to collect on debts owed and may be able to pursue legal action to obtain their payments. Bankruptcy will allow for debt resolution with the legal protection you need to get on with life.