A business is never expected to fail, but statistics show that many small businesses do. According to the U.S. Bureau of Labor Statistics, around 20% of small businesses fail in their first year of operation, and by year five, almost 50% have closed their doors. If a small business does fail, the owner may be faced with a substantial amount of debt.
However, bankruptcy exists to help people and businesses deal with their debts and move forward with a fresh start. Whether you are a business owner who has decided to shut down or an individual struggling to manage their debts, bankruptcy can relieve financial burdens.
What Is Chapter 7 Bankruptcy?
In the United States, several types of bankruptcy are available to individuals and businesses. These include Chapters 7 and 13, while Chapter 11 is only available to businesses. Chapter 7 is often called “straight” bankruptcy, which involves liquidating a portion of your assets to repay your creditors. However, most Chapter 7 cases are “no asset” cases, meaning that you do not have to surrender any of your assets to the state. If you give up some belongings, you must only surrender nonexempt properties.
What Can I Expect When I File For Bankruptcy?
When you file for bankruptcy, the court puts a temporary hold on your debts, which means that creditors cannot take any action against you, such as collecting payments, foreclosing on your property, or turning off your utilities. A trustee will be appointed to your case, and he or she will review your finances and oversee your Chapter 7 bankruptcy. The trustee will assess your financial information and decide which properties should be liquidated. A meeting of creditors, also known as a 341 hearing, will be held where the trustee will review your finances on record. This meeting is typically brief, lasting less than 15 minutes, and creditors usually do not attend.
Filing Chapter 7 Will Close Your Business.
When considering filing for Chapter 7 bankruptcy, it is essential to note that this option results in the closure of the business. Therefore, it is generally recommended for business owners who have decided to cease operations and do not intend to transfer ownership to someone else. While corporations and LLCs can file for Chapter 7 to eliminate their debts, such cases can be complex. However, filing for Chapter 7 can be advantageous as it provides a clear and transparent process. In some cases, former business owners may struggle to demonstrate that their company has indeed ceased operations, leading to continued harassment by creditors. By filing for Chapter 7, it sends a clear signal to lenders that the business is definitively closed.
Making Bankruptcy Work For You
Bankruptcy is commonly perceived as a negative term, but this belief is unfounded. It is a valid method of eliminating debts and starting anew. Entrepreneurs, in particular, should not shy away from utilizing this option. According to the U.S. Bureau of Labor Statistics, it is not uncommon for businesses to close. Bankruptcy should not be viewed as a sign of defeat but rather as an opportunity for former business owners to explore new possibilities.
Take A Step Toward The Relief You Need
Whether you are a business owner or an individual with overwhelming debt, an experienced bankruptcy attorney from Winterbotham Parham Teeple, a PC can help you regain control of your life. Call us at 800.400.9000 today to see how we can help you.