Small Business Owners May Face Bankruptcy Dilemma
For most workers, filing for personal bankruptcy is a stressful decision, but it’s fairly straightforward. If a debtor qualifies under the Chapter 13 means test and determines that restructuring his debts allows him to keep more of his assets or more of the assets he wants, then he moves forward under Chapter 13. On the other hand, if his monthly income or overall debt level exceeds Chapter 13 or if he decides that the speed of Chapter 7 is more valuable than its costs, then he moves forward with a straight liquidation.
For some small business owners, bankruptcy can be that simple – but that’s not always the case. If the business in question is a sole proprietorship, the Bankruptcy Code considers these debts to be personal, not business. Alternatively, if the debts are entirely the obligation of a partnership or corporation, Chapter 11, not Chapter 13, will apply. When the owner of the debt isn’t at issue, small business owners may get off easy.
Unfortunately, however, today’s tight lending environment requires many small business owners to be personally liable for their partnership or corporation’s debts. Like a parent who assures to pay the debts of a child, a small business owner’s surety for the business’s debts can add a complicated wrinkle in the event of a business’s downturn. Ultimately, the small business owner may have to simultaneously take his business and his own family through separate bankruptcy proceedings.
Chapter 11 and Chapter 13 can be difficult to navigate. Travelling through both of them at the same time is particularly challenging. If you’re a small business owner, you may want a little guidance. Fortunately, the attorneys at the law firm of Fears Nachawati are here to help you. With years of experience and dedicated expertise, we know how to advise you. Talk to our professionals today for your free consultation. Let us help you.