Bankruptcy for Small Business Owners

As the COVID-19 pandemic caused businesses across the country and throughout Indiana to temporarily shut down, the disruption in revenue has been harmful to many owners. Small business owners are finding their business interruption claims are being denied, and there are many questions about whether or not they can continue operating. In some situations, it might be best to file for bankruptcy to address your remaining business debts and start over. 

Large corporations such as Gold’s Gym and J. Crew have filed for Chapter 11 bankruptcy stemming from financial losses caused by the coronavirus crisis. However, Chapter 11 can be a lengthy and costly process, and it is often not the best option for small business owners. Fortunately, there are other options available, and you should discuss your specific situation with a Merrillville bankruptcy attorney as soon as possible. 

Chapter 7 Bankruptcy for Small Businesses

If you are ready to close the doors on your enterprise and start fresh, Chapter 7 bankruptcy can be a great opportunity to resolve your debts, so you can move forward. When a corporation or LLC files for Chapter 7 bankruptcy, the bankruptcy trustee will be in charge of liquidating the remaining business assets. These funds will go toward priority debts, and then the court can order the discharge of remaining debts. This allows small business owners to move forward without the stress of debts from their previous enterprise. 

If you are a sole proprietor or have a general partnership, you can file Chapter 7 bankruptcy to take care of both your business debts and your personal debts. Depending on your financial situation, this can be highly beneficial. 

There are some drawbacks to Chapter 7 bankruptcy for business owners, however. For example, you cannot protect any of your business property with exemption like you could protect your personal property. Additionally, your business will be liquidated so you will not be able to continue operations. In some situations, selling your business property and assets might be a better option, so you should discuss Chapter 7 pros and cons with a bankruptcy lawyer. 

Chapter 13 Bankruptcy for Sole Proprietorships

While business entities cannot file for Chapter 13 bankruptcy, sole proprietors and partnerships can include business debts in their personal Chapter 13 filings. If you want to try to continue operating, Chapter 13 can allow you to keep your business property while completing your repayment plan. Chapter 13 bankruptcy does take three to five years (compared with about six months for a Chapter 7 case), though it can help get your business back on track, so you do not have to start a new enterprise from scratch. 

Contact an Experienced Merrillville Bankruptcy Attorney for Help

It can be difficult for business owners to know how to proceed in the face of lost revenue and increasing debts. You should not wait to discuss your options with the team at Whitten & Whitten. Contact us to discuss your specific situation and how we might help.