Depending on your business situation, you’ll have one of two options: either be forced to liquidate your business or have the chance to continue running it. Many different factors, such as whether you’re the sole proprietor or if your business is losing money, play a role in what will ultimately happen.
When Will You Be Forced To Liquidate Your Business?
In order to prevent you from incurring further debt, the bankruptcy trustee may insist you shutter your business after you file for bankruptcy, at least while they assess the value of your assets and your exempt status. If the trustee decides that you have nonexempt assets, they will force you to sell your business assets and pay off your creditors.
What Type of Bankruptcy Should You File to Keep Your Business?
On the other hand, you may be able to keep your business through bankruptcy. Below are the three bankruptcy options you have in order to keep your business:
1. Chapter 7 Bankruptcy Option
If you are the sole owner of your business and have little or no assets, Chapter 7 bankruptcy could be the way to go. Since Chapter 7 discharges both your personal and business debts, you’ll be able to use exemptions to protect your business and its assets. You’ll wipe out your debt and be able to continue running your business.
2. Chapter 13 Bankruptcy Option
Only sole proprietors can file for Chapter 13 bankruptcy. If you have a significant amount of nonexempt assets, this option is best because you’ll be able to reorganize your debts through a repayment plan that is designed to let you continue running your business.
3. Chapter 11 Bankruptcy Option
If your business is an LLC, corporation or partnership, you will have to file a Chapter 11 bankruptcy instead of a Chapter 13. Much like a Chapter 13 bankruptcy, Chapter 11 will allow you to make repayments while keeping your business running. The only difference is that you’ll need to file operating reports once the plan is approved by the creditors.To learn more about bankruptcy for you and your business, reach out to our Northbrook bankruptcy lawyers for help. Contact us today!