As a business owner, facing the fact that your business is struggling is challenging. This is especially true if you have worked tirelessly to make it a success.
Unfortunately, many factors may have resulted in your business facing the reality of filing for bankruptcy. However, before moving forward, there are a few things you should consider.
When you start a business, you may invest your own money. While it’s a common practice, it’s also a dangerous one. Failure to separate business and personal finances means you may be liable (personally) for some of your business debts.
While this isn’t the case with an LLC, it isn’t the case with other business entities. It’s a good idea to consider your business formation and personal liability to determine which type of business bankruptcy is right for your situation.
The amount of debt you have may impact the type of business bankruptcy you have. For example, for a lot of debt that you have no idea how you will repay, a Chapter 7 may be best even in the future. However, you can also consider filing for Chapter 13 or Chapter 11 bankruptcy to repay your debts.
Do you want to continue operating your business after filing bankruptcy? If so, choosing Chapter 7 isn’t recommended since this will likely result in you liquidating the business and all your related assets. However, with other bankruptcy options, like Chapter 11, you may be able to keep your doors open and work through the process.
Understanding the business bankruptcy process
Filing bankruptcy for your business can provide some financial relief. However, you need to understand the process and outcome of this filing fully. This will help you decide if it is the right option.