Running your own business can be very rewarding, but it can also be extremely challenging when things don’t go according to plan. If your business is suffering from declining revenue, rising costs, a devastating lawsuit, or anything that puts its financial health in jeopardy, you should consider bankruptcy as an option to put things back on track. The lawyers at Davis & Greene can advise whether you need to file under the business name or personally and which chapter to file.
If you own your own business you most likely are personally liable for all the debts in the company name regardless of whether you are incorporated or not, so for most small business owners a personal bankruptcy is all that’s needed to resolve business debt issues. However, the total value of the business will be disclosed as a personal asset, which could result in the trustee seizing business assets depending on the value and character of those items. Small business owners are also exempt from the means test for filing Chapter 7 if a majority of the total debt is business related.
A business may also file bankruptcy in its own name, but that won’t alleviate the owners from responsibility of the debt for which they have signed personal guarantees. As soon as the business files bankruptcy the trustee takes possession of the business and closes it down, and there are no exemptions to protect the assets of a business entity so the whole operation will be closed and sold off when you file a Chapter 7 liquidation for a business. It is also possible for a business to reorganize under Chapter 11, but that is usually for large corporations instead of small businesses.