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.
Vivona Pandurangi, PLC offers legal services for small business owners in the Alexandria and 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 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, your case may be closed as fully administered.
During a Chapter 7 bankruptcy, you must fill out all appropriate forms and schedules, and meet with your attorney and trustee.
A Chapter 7 bankruptcy can be completed quickly.
You may be able to keep some or all of your assets or purchase those with significant value from the trustee.
Chapter 7 will stop collections or lawsuits against you.
You could potentially lose business assets that have significant liquidation value.
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. Our small business bankruptcy lawyers in Alexandria and 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 can be 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.
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 face financial difficulty within the first three to ten years due to numerous financial burdens. If you are one of these small businesses, then you should to consider how bankruptcy will help save your business.
One of the considerations is your business structure.
A Chapter 7 bankruptcy may be used for sole proprietorships. However in this case, because there is no separate legal entity, your business would simply be included in a personal bankruptcy filing by you individually. It is a good option if your business does not have substantial assets or if you have some ability to purchase valuable business assets from a source of funding that is not a part of your bankruptcy estate. If you operate a sole proprietorship that is merely an extension of your skills, you can obtain a discharge of your consumer and business debts and retain your ability to continue your profession or trade. Chapter 7 is also a good option if you seek to cease operating the business.
If your business has assets with significant liquidation value that can not be purchased from the trustee, you can seek Chapter 11, or even Chapter 13, which will allow you to remain in operation while working out a plan to repay your debts over time. In Chapter 11 you can retain some or all of your assets while using your income to fund a plan to repay creditors some or all of what they are owed. Also, depending on the size of your debts, you may be eligible for a Chapter 11, Subchapter V bankruptcy which has more streamlined procedures than a standard Chapter 11 and is similar to a Chapter 13 case.
Either a Chapter 7, standard Chapter 11, or Chapter 11, Subchapter V bankruptcy can be beneficial for a business entity, such as an LLC or Corporation, depending on the business structure, size of the business, and size of the debts. Only individuals may file Chapter 13 bankruptcy so this option is not available to business entities. Regardless of the chapter utilized, you have to determine if you must liquidate some or all of your assets, or if you can generate sufficient income to justify remaining in business and retaining assets. You can also determine whether it is most beneficial to restructure the current business entity, re-constitute as a new entity, or simply close down the business altogether.
Which type of bankruptcy is best for you? Find out more by contacting Vivona Pandurangi, PLC. We provide legal services for business owners who are seeking debt relief. Call us today and get a free consultation from small business bankruptcy lawyers in Alexandria and Falls Church, Virginia. We also offer services in Arlington, Fairfax, Manassas, Prince William, and Loudoun.