The past year caused literal changes to our daily lives. The mandatory lock-down caused an economic shutdown affecting the business sector. Well known brands and major companies in every industry filed bankruptcy one after another and it seems like more are still yet to come to terms with their lawyers.
According to bankruptcy attorney’s, filing bankruptcy isn’t a death sentence. Chapter 11 bankruptcy for instance gives companies a chance to negotiate with their creditors to restructure their debt terms. This means that bankruptcy reorganizations can salvage an already failing company from debt.
However, Chapter 11 reorganization is an expensive and time consuming process that only large corporations can handle. What about independent business owners, small businesses and sole proprietors that make up a couple million operating in America’s business sector? What could be their options?
The most recommended is to file for Chapter 7 liquidation bankruptcy. This type of bankruptcy works for both business entities and independent/sole proprietorship type of businesses. While this will liquidate business assets resulting in a total shutdown, it is the cheapest and quickest way for business owners to settle their struggling business.
Technically, the debt still exists but the company will be left without any value after the process. The business will be legally shut down and the creditors have nothing to collect.
The only problem is when a business owner wants to preserve the business. For sole proprietorships, Chapter 13 could be one of their options but business entities are not authorized to file this type of bankruptcy.
Another option for independent business owners is a Personal Chapter 7 bankruptcy which is a short term solution with higher risks that needs careful consideration.Consulting an experienced bankruptcy attorney is highly recommended before making decisions.