If you have stacks of bills and growing debt that you can’t get out of on your own, you might be considering filing for Chapter 7 bankruptcy. While this can help with your finances, you might have concerns over how this will impact your business if you own your own company.
Learn some potential effects you can experience after filing for Chapter 7 bankruptcy.
What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy can help you get rid of your debt by liquidating your assets. This means you will have to give up some of your possessions to put the money toward your bills.
As soon as you file for Chapter 7 bankruptcy, the court will put a stay on your current debts to stop creditors from collecting payments, foreclosing on your home, repossessing your property, garnishing your wages, and other means to collect the debt.
A court-appointed trustee will review your finances and assets and assess your application. They will then work to sell off your nonexempt property to pay off some of the debt, and arrange a meeting between you and your creditors.
When your bankruptcy is complete several months after submitting your application, the court will discharge the remaining qualifying debts. Certain debts – like child support, taxes, and alimony – cannot be discharged.
How Does Chapter 7 Bankruptcy Impact Your Business?
If you own a business, there are certain impacts that can occur when you file for Chapter 7 bankruptcy can have on your company. It’s essential to work with a bankruptcy attorney to understand what you can expect during the proceedings.
One key method your attorney will discuss with you is making your company or its assets exempt. You may be able to protect the business, your ownership interests or shares, or the equipment, products, and other items necessary to run your company. In many cases, you can protect the tools you use to perform your work or your trade, including vehicles. Your attorney will be able to advise you on what is eligible to be marked as exempt.
How a Chapter 7 bankruptcy impacts your business can depend on the type of business you operate:
- Sole proprietorship: In this situation, since you are the only owner, you own everything associated with the business – including the equipment and debts. Because of this setup, your assets and debts can be intertwined with those of your business.
- Corporation and LLC: In incorporated businesses, the company is separate from you. This means your assets and debts are considered independent of the company’s – and the company’s debts and assets are not directly tied to you. In this situation, you likely own shares in the company.
- Partnership: Like in a sole proprietorship, you are personally liable for all of the debts tallied by the business, so these will be included in your bankruptcy. However, this can get complicated with your partner – since your bankruptcy can absolve you from the business debt. It’s important to consult your bankruptcy attorney to determine how to handle the business debt and work with your partner to establish legal guidelines to follow when filing for bankruptcy.
Because personal bankruptcy can impact your business, it’s essential to hire a Chapter 7 bankruptcy attorney to help you through the proceedings.
Contact an Attorney
If you are considering filing Chapter 7 bankruptcy to cope with mounting debt, it’s crucial to hire an experienced attorney to help you through the process and protect both yourself and your business. Our experts can help you determine how to protect your property and correctly navigate the Chapter 7 bankruptcy proceedings. Don’t let debt ruin your life. Call (405) 529-9377 for a free case review.