A filing for bankruptcy as a business owner can be just as stressful and overwhelming as a personal bankruptcy. While some businesses make it through bankruptcy better than before, others may not be so lucky. But don’t worry! There is life after a business bankruptcy.
There are both benefits and downfalls with filing for bankruptcy as a business, but one this is for sure; you will end up in a better financial position than before. Why? In order to qualify for a business bankruptcy, the business must be suffering from significant financial troubles. This means that the chances of finding relief through bankruptcy and absolving the debt burdens is much greater through bankruptcy than through no action at all.
After A Discharge
If business debts are discharged through a business Chapter 7 case, there is a good chance that the business will halt operation. In most cases, the business will be permanently closed and the remaining assets will be liquidates to satisfy debts to creditors. Any stocks or ownership rights are also dissolved at this time. Although the business may be lost, the debt burden will go with closing of the business as well. Business owners will no longer be responsible for their debts and will be absolved of future liability over those debts.
The good news is that a business bankruptcy does not go on your personal credit report history. However, if a portion of your business debts were tied to personal accounts, your personal credit report may be affected. In general, a business owner is free to pursue a new business venture after their debt discharge.
Business debts discharged through a Chapter 11 case generally remain in operation and resume business as usual. Part of the Chapter 11 plan is to regain profitability, to which a portion of the proceeds go towards repaying creditors. Most business owners find that their business life after a Chapter 11 discharge is relatively unaffected. In most cases, the business recovers from its debts and becomes profitable once again.