Operating a business creates a variety of challenges. Some business owners face great odds in launching a business or reaching the point of financial gains. With the many costs that businesses face, it is no surprise that many business owners face financial challenges. Facing personal debt in addition to financial problems with a business frequently results in individuals facing substantial challenges. Fortunately, bankruptcy offers several options for relief for business owners.

Available Bankruptcy Options for Business Owners

Many business owners are able to select between three bankruptcy filing options. There available bankruptcy options for business owners include the following:

  • Chapter 7 Bankruptcy. This type of bankruptcy results in operations of the business ceasing. Creditors of the business will receive notice that the business is no longer operating and any remaining assets are liquidated by a bankruptcy trustee then divided among creditors in order of highest priority first. A business owner will still be liable for some of the business’s debt provided that there were not sufficient assets to pay creditors in full at the time that Chapter 7 bankruptcy is declared. This option is most often selected by sole proprietors, general partnerships, and even some corporations.
  • Chapter 11 Bankruptcy. In this type of bankruptcy, the operation of a business continues even if temporarily. In these situations, the business obtains an income but does not possess enough to immediately solve all of its debt related problems. Chapter 11 bankruptcy is an option for corporations, LLCs, partnerships, and sole proprietors.
  • Chapter 13 Bankruptcy. A business owner attempts to eliminate and discharge as much outstanding debt as possible. Provided that some specific requirements are met, a business owner receives a discharge of personal debts as well as personal guarantees of the business.

How to Select a Bankruptcy Plan

Business owners should follow several steps in deciding which bankruptcy plan to select. These steps include the following:

  • Educate About Options. A business owner interested in filing for bankruptcy should educate themselves about the various options that are available for business owners. The plan that is ultimately selected should correspond to an individual’s personal and business goals. It is best to be objective in this process and make sure that the most suitable bankruptcy plan is selected.
  • Decide what bankruptcy method to use. Once a plan is selected and approved, a business owner will spend the next several years following the plan. In many cases, a business bankruptcy can be very helpful to a struggling business owner if it is the result of careful analysis. It is also important to understand that depending on the structure of a business, a different group of individuals will be authorized to file for bankruptcy. For example, a board of directors decides whether a corporation should file for bankruptcy and as a result a shareholder or individual without the authorization of the board of directors cannot file for bankruptcy.

Contact an Experienced Bankruptcy Attorney
If you have questions about a potential business bankruptcy, it is a wise idea to consult about matters with a bankruptcy attorney. Attorney Jim A. Lyon will answer your bankruptcy questions, help to evaluate the needs of a business, and explain the best possible options. Contact Attorney Lyon today to begin taking control of your bankruptcy case.