Nine out of ten startups are not successful. 80% of restaurants go under within the first five years. 87% of all agents in real estate do not achieve the results that they want. There are a hundred reasons your business may not have been as successful as you thought it could be, and we understand that.
As bankruptcy attorneys, we recognize that you need some help navigating through bankruptcy. Sometimes, it can be the right choice for your small business to file those particular papers.
Understanding the Different Types of Businesses
Every business is unique. Your company has its own management style, assets, and practices. Your business may be a sole proprietorship, a partnership, or you may not have separated your assets. In any circumstance, the legal definition of your business is important.
Exactly what type of business you have may influence whether it is better to file for Chapter 7, Chapter 11, or Chapter 13 bankruptcy. Chapter 11 filings for small businesses are exceedingly rare, but it can never hurt to understand all your options.
When is the Right Time?
The right time to file for bankruptcy is when your business is failing, and your personal assets are in peril. Creditors might be able to seize your assets in certain circumstances, and a judge may make a ruling that does not go in your favor.
If you have a Limited Liability Corporation, your personal assets might not be at risk. The only liability is on the company itself. Your business could fail, but you may not personally be on the hook for the amount you owe.
However, in some circumstances, the business owner may be required to pay back their debts another way. When financing is secured by personal collateral, a failing business could mean that you lose your home. In these circumstances, it is wise to start looking for a way out.
Chapter 7 and Chapter 13
A Chapter 7 bankruptcy signals the end of a business. A trustee is named, and he or she is responsible for selling the assets of a business. All proceeds go to paying debts. Should the proceeds of the sale be less than the total amount of debt, the remaining debt is forgiven.
In some cases, should the assets not be bought when they are put up at auction, you can buy your own assets back. For most small businesses, Chapter 7 bankruptcy is the route that they select.
Chapter 13 bankruptcy is slightly different. When a business files for Chapter 13 bankruptcy, the business can continue. The business owner must file for a repayment plan, which describes how he or she will repay their debts.
The big downside for Chapter 13 bankruptcy is that the budget is fairly strict. When companies still have some source of income, this is usually the route that they go. Businesses ultimately keep their assets after they have repaid their debts. However, most of the time, Chapter 7 is the better option.
If you are dealing with bankruptcy, call Patrick Cordero. He is an experienced, personable, and highly-resourceful lawyer. We can take on your bankruptcy case.