If you are considering bankruptcy to deal with business debt, your first thought might be Chapter 11, the bankruptcy section that allows businesses to restructure their debt while continuing to operate. But even though more than 10,000 businesses file for Chapter 11 bankruptcy protection each year, a very small percentage ever gets back on healthy financial footing. So, what if you’d rather close your business? At Hayes, Berry, White & Vanzant, LLP, our experienced bankruptcy attorneys can show you how filing Chapter 7 for your business can lead to an orderly dissolution without all the complexity and expense of Chapter 11.
Chapter 11 bankruptcy is designed to give a business a fighting chance to overcome severe debt and become viable again. If you want to keep your dream company alive, Chapter 11 is worth considering. On the other hand, you might be tired of the grind and ready to dissolve your struggling LLC or incorporated company. Under those circumstances, Chapter 7 liquidation bankruptcy is the appropriate action.
With Chapter 7, a bankruptcy trustee takes control of your company assets, sells those assets and disperses the proceeds to your creditors. After this process, the bankruptcy court discharges your business debts. However, if you were personally liable for business debts under the structure of your entity, those creditors can now come after your personal assets. Depending on how much is owed, you might want to consider Chapter 7 bankruptcy to discharge this business debt along with your remaining dischargeable debt.
Sole proprietorship is the simplest form of business, but it gives the owner the least amount of protection from company creditors. If you started a small business, you probably weighed the pros and cons of incorporating. You might have decided the simplicity of a sole proprietorship was best as you tested the waters with your new enterprise. You were free from complex filing requirements and could prepare your taxes easily. Incorporation could wait until you were ready to expand, attract investors and move into a new facility. But something happened along the way. Perhaps you took out a personal line of credit to hold the business over through a rough stretch that only got rougher. Now you are personally liable for business debts you can’t ever hope to repay.
However, because there is no separation of personal and business assets or debts with a sole proprietorship, filing Chapter 7 eliminates dischargeable debt from both categories while allowing you to hold onto exempt assets. A bankruptcy lawyer at our firm can explain how the law would operate in your case.
Hayes, Berry, White & Vanzant, LLP represents North Texas businesses in Chapter 7 bankruptcy filings. Call us at 940-230-2386 or contact us online to schedule a consultation. We have four North Texas offices, located in Denton, Flower Mound, Gainesville and Celina.
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