Are you having difficulty keeping your business afloat? If so, bankruptcy can give you the financial leverage you need to keep your doors open while liquidating or paying off your debts. Therefore, it is important that you understand how bankruptcy can help and which type of bankruptcy is best for your business.
AP Law Group, PLC offers legal services for small business owners in the Falls Church area. We can meet with you to discuss your current financial situation, your creditors, and what debt relief solution works for you. To find out more, call us for a free case review with a small business bankruptcy lawyer in Falls Church, Virginia.
According to the Small Business Administration, small businesses, those with fewer than 100 employees, account for 99.9% of all U.S. businesses. However, many of these crumble within the first three to ten years due to numerous financial burdens. If you are one of these small businesses, then you need to consider how bankruptcy will help your business.
One of the primary considerations is your business structure.
A Chapter 7 bankruptcy is often used for sole proprietorships. It is a good option if your business does not have any substantial assets. More specifically, if you operate a sole proprietorship that is merely an extension of your skills, it usually does not benefit you to reorganize your business.
A Chapter 7 bankruptcy is rarely a good idea for partnerships. A better option may be a Chapter 11 bankruptcy. In a Chapter 11 bankruptcy, you can retain all of your assets and pay back a portion or all of your debts through an established repayment plan. Under Chapter 11, your company reorganizes and continues in business while paying off the debts.
Both a Chapter 7 or Chapter 11 bankruptcy can be beneficial for an LLC depending on the business structure, size of the business, and size of the debts. In the end, you have to determine if you can liquidate your debts or need to pay them off. You also need to decide if you are staying in business or closing your doors.
In a Chapter 7 bankruptcy, a trustee is appointed to liquidate nonexempt assets from the business to pay off creditors. Once the assets are liquidated, and creditors are paid, all remaining debt is discharged.
During a Chapter 7 bankruptcy, you undergo credit counseling, fill out the forms, and meet with your attorney and trustee. There are two main eligibility requirements to file Chapter 7. First, eight years must have passed before your last bankruptcy. Second, you must pass a means test.
A Chapter 7 bankruptcy can be discharged quickly.
You may be able to keep some of your assets
Chapter 7 can stop collections or lawsuits against you.
You must pass the means test.
You could potentially lose business assets.
Chapter 7 may have a negative impact on your credit score.
A Chapter 11 bankruptcy involves reorganizing your debts, assets, and business operations. This type of bankruptcy can give your business a fresh start. However, for the reorganization to work, you must fulfill the terms or obligations outlined in the plan.
Chapter 11 bankruptcy is open to almost any business size or structure, including partnerships. There are no income or debt requirements and no limitations for filing. However, due to the complexity of Chapter 11, you may find it difficult to navigate the process. A small business bankruptcy lawyer in Falls Church, Virginia, can be a valuable asset in your case.
You can continue running your business.
Collections and lawsuits will come to an end.
Creditors may be open to renegotiating your debts.
Chapter 11 bankruptcies are often lengthy and expensive.
It can take you several years to pay off your debts.
Your reorganization plan must be approved by the court and, in some cases, your debtors.
A Chapter 13 bankruptcy enables you to develop a plan to repay all or part of your debts. Under this type of bankruptcy, you propose a repayment plan over the next three to five years.
A Chapter 13 bankruptcy is not available to all business structures. Sole proprietors filing as individuals are eligible to file a Chapter 13 under lower debt limitations. The individual’s unsecured debts must be less than $394,725 and secured debts less than $1,184,200.
Chapter 13 allows you to save your home or business from foreclosure.
Chapter 13 has a provision that may protect co-signers.
You have no direct contact with creditors under a Chapter 13 arrangement.
You can discharge a wider range of debts.
You only have five years to pay off your debts.
All disposable income is channeled into the repayment plan.
You report to a trustee who distributes all payments to creditors.
Which type of bankruptcy is best for you? Find out more by contacting AP Law Group, PLC. We provide legal services for business owners who are seeking debt relief. Call us today and get a free consultation from a small business bankruptcy lawyer in Falls Church, Virginia. We also offer services in Alexandria, Arlington, Fairfax, Manassas, Prince William, and Loudon.