If your business is facing financial problems and your creditors are harassing you for outstanding payments, you might save your business from ruin by filing for bankruptcy. Many people think of bankruptcy as the end of a business, but in reality many companies emerge from bankruptcy and go on to renewed success.
Still, it can benefit you not to rush into bankruptcy right away. As a business owner, you may have multiple bankruptcy options available to you. Also, you should strategize your bankruptcy in the right way so that you stand the best chance of saving your business. Here are three factors to consider prior to filing a bankruptcy petition.
Goals for your business
Smart Asset suggests thinking about whether you intend to stay in business after the bankruptcy. The pressure of dealing with creditors and business debt may motivate you to close down your business once you have dealt with your creditors. A Chapter 7 liquidation filing might be the better option in this case.
Alternatively, you may want to save your business and then sell to it to a new owner, or you may desire another chance to run your business with yourself in charge. If so, you might go with a Chapter 11 filing that gives you the chance to repay some creditors and return your business to operation.
Personally guaranteeing your business debts
Many business owners separate their personal and business finances to decrease their personal liability. If you have no personal money involved in your business debts, you do not have to worry about creditors trying to take away your car or your home. However, if you have personally guaranteed your business debts, you may need to file for personal bankruptcy to ward off creditors.
Your business structure
The type of business entity you have formed will dictate what bankruptcy options are open to you. For instance, if you are a sole proprietor, you may file for Chapter 13 bankruptcy. If your business is an independent entity like a corporation, you must choose Chapter 11. Also, the size of your business will also make your bankruptcy more complex. It might take the assistance of various professionals to form a comprehensive plan to navigate your bankruptcy.