Small Business Owners: When Is It Time To File Bankruptcy?

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Bankruptcy can be a terrifying experience. It is the unknown that is most often uncomfortable. Bankruptcy is an unknown. You may know nothing about it, whether it be the process or when to file. However, having an experienced attorney to pacify you in your moment of need, can be priceless. Contact Florida Bankruptcy to get the help and peace of mind that you need.

Bankruptcy is something that no small business owner ever wants to think about. Although, there may be times that there are no other options but to file for bankruptcy. As a small business owner, it may be hard to see when you should file for bankruptcy. When you are in your business and working on it every day, it may be hard to know when it is time to get some help.

Formation of Your Business and Seeking Advice from Bankruptcy Attorneys in Naplesperson shaking hands with attorney

A lot of times whether or not you file for bankruptcy and seek the help of a bankruptcy lawyer in Naples will depend on how your small business was formed. If you have formed your company as a corporation or an LLC, then you may not have to file for bankruptcy. Often, a corporation or LLC can just close their doors if they are not doing well financially.

Courts usually cannot get to personal assets when your company is formed as a corporation or an LLC. This means that you will be personally protected from any creditors. There may be some debts that have to be paid but the company does not have to continue running at a loss. However, if you mingle your personal finances with that of your business, it will not matter that you have a corporation or LLC, because a court will view your personal finances and business as one entity.

Whether or not you file for bankruptcy will most likely depend on your creditor’s access to your personal finances. If your creditors can access your personal assets, it may be a good idea to file for bankruptcy. Quickbooks has said, “When personal assets, such as a home, are at stake in a business failure, bankruptcy may be the best way to protect them from creditors. Choosing which type of bankruptcy to file for can be complicated because it hinges upon state laws and a host of other variables.” There are multiple types of bankruptcy that you will have to look at. These multiples types are referred to as “chapters.” Depending on your situation, there may be one chapter that is better than the others.

Which Type of Bankruptcy is Best for Small Business Owners?

So you have decided with the help of a Naples bankruptcy lawyer to file for bankruptcy, but how do you know which chapter to file under? Circumstances will dictate which chapter will be the best for you to file under. A Naples bankruptcy lawyer can help you wade through the many options for you to file under. Looking at all the options and when to use a certain chapter will create a clear picture for you. The following are the various chapters you can file under as a small business owner, discussed by All Business:

  • Chapter 7 Bankruptcy: When you are a sole proprietor, you will have to file for personal Chapter 7 because it will cover your personal debts and business debts. This is the filing if you are a sole proprietor or mingle your business finances and personal finances under an LLC or corporation. In order to cover your debts, the business will have to be sold and all assets will be liquidated.
  • Chapter 11 Bankruptcy: This chapter allows the business to keep functioning while paying its debts. Creditors will have to approve the repayment plan, so debts will not be forgiven under Chapter 11. However, you will be able to pay back your debt on a more convenient repayment plan.
  • Chapter 13 Bankruptcy: The only way that you can file for Chapter 13 is if you are a sole proprietor. Businesses that are corporations, LLCs, etc., will not be able to file under Chapter 13. In this chapter, you will have to create a repayment plan. This repayment plan will have you pay a certain amount of debt back to your creditors.

 

A bankruptcy lawyer in Naples can help you pick the chapter that best fits your situation. Contact Florida Bankruptcy to pick the chapter that will help you and your business. There are also exemptions that come into play with any of these chapters. Depending on the type of debt, especially under Chapter 7, you may not have to pay a certain debt back.

Overall, the type of chapter that you will have to choose will be determined by your specific circumstances. One of the deciding factors will be the way that your business was formed. Certain types of formations, like a corporation or LLC, are limited in which chapter you can file under. Seeking the help of an experienced bankruptcy lawyer in Naples will be essential to your success. Their understanding of the law, which chapter to file under, and the process of filing, is important so that you can get through the process smoothly.  

What Is The Bankruptcy Process?filing for bankruptcy

Filing for bankruptcy is a process that takes time and understanding. This understanding will come from a bankruptcy lawyer in Naples. It is essential to have an experienced attorney in your corner during this process. Legal proceedings, like bankruptcy, can be difficult to understand. They often involve technicalities and details that are difficult to follow. In addition to that, there are a lot of procedures that have to be followed in the judicial system. A Naples bankruptcy lawyer will know and understand how to file for bankruptcy and present the case before the bankruptcy judge.

There are certain requirements that will have to be followed to file for bankruptcy. You will have to sit down and gather everything you have dealing with your finances. Your finances will have to be analyzed with your bankruptcy filing. You will then have to receive credit counseling. This counseling is to make sure that filing for bankruptcy is the right option. If it is, you will then file a petition with the court. The long process through the judicial system will begin. There will be many documents that will have to be filed and many deadlines that will have to be met. Experienced attorneys can make this a smooth process and help you feel comforted through this difficult time.