Starting the conversation about bankruptcy can be difficult. It’s tough to think about ending a business you’ve worked hard to build. You might even start to question if business ownership is really for you. But remember, every business faces challenges. Don’t let these hurdles stop you from pursuing your goals. There are several options available to either keep your business going or allow for a graceful exit if the burden becomes too heavy.
Chapter 7 and your partnership
Chapter 7 bankruptcy, often referred to as liquidation bankruptcy, could be an appropriate path if there’s no realistic chance for your business to recover. It allows you to close your business and liquidate its assets to pay off debts. However, if you’re in a partnership, there’s a significant caveat: a partnership doesn’t have a separate legal status like corporations or LLCs do. This means that the financial responsibilities of the business directly impact you and your partners.
This personal liability suggests that if your company’s assets fail to cover all its financial obligations, creditors could potentially go after your personal assets to meet these obligations. In Florida, certain personal assets may be protected under state law, such as homestead property and specific personal properties. However, unprotected assets could be at risk, including additional real estate holdings and those not exempted.
Chapter 11 implications
On the other hand, you might want to consider Chapter 11 bankruptcy, which is often referred to as reorganization bankruptcy. Here, you can focus your efforts on restructuring your debts. This might be a more fitting choice if you and your partners believe that the company can survive with a reduction or restructuring of its debts.
But you have to show that your business has a viable future and that the proposed restructuring plan is in the best interest of your creditors. Your creditors must accept your proposed plan and the bankruptcy court must approve it. Once approved, you can start implementing the plan and gradually pay off your debts.
Seeking legal counsel
Each type of bankruptcy comes with its own set of advantages and disadvantages. The decision to choose between Chapter 7 and Chapter 11 should be based on the circumstances and future prospects of your partnership. So, in navigating these complexities, it could be beneficial to seek an attorney to help protect your interests. Rebuilding a business takes time, but with the right knowledge and guidance, you can chart a path forward.