First things first, bankruptcy may NOT be your best option. Bankruptcy lawyers have lots of tools to choose from to help distressed business owners get rid of debt and save their businesses. Small businesses face a broader set of considerations that must be weighted carefully before filing for bankruptcy. The best solution depends on how your business is structured, the amount of assets and debts it has, your specific goals and a host of other factors.
There are several types of bankruptcy that your business may file for and each is closely tied to how your business is structured.*
Chapter 7 – More commonly referred to as liquidation, this bankruptcy route is appropriate when a business has no future and lacks substantial assets. Because of this, it is often suited to sole proprietorships and small businesses, when the company is essentially an extension of its particular owner’s skills. Under Chapter 7, the bankruptcy trustee will sell assets to satisfy outstanding debts and discharge debts that can’t be satisfied with the available assets. More.
Chapter 11 – If your business has a plan for future recovery, Chapter 11 supports the continuation of a business under a reorganization plan. Although it can be a very complex process, Chapter 11 applies to sole proprietorships, corporations and partnerships. If you choose this option you can expect to operate under increased scrutiny from a court-appointed trustee. More.
Chapter 13 – Under Chapter 13, you file a repayment plan with the bankruptcy court detailing how you are going to repay your debts. Chapter 13 bankruptcy is a reorganization bankruptcy typically reserved for consumers, though it can be used for sole proprietorships. If your personal assets are tied in with your business assets, as in a sole proprietorship, you can avoid the risk of losing your house if you file Chapter 13 versus Chapter 7. More.
Chapter 12 – Chapter 12 is designed for ‘family farmers’ or ‘family fishermen’ with ‘regular annual income”. Under Chapter 12, debtors propose a repayment plan to make installments to creditors over three to five years.
Don’t wait too long or your options dwindle. Contact us at (406) 752-5616 to discuss your options. We can take a look at your situation and provide expert legal guidance based on four decades of small business bankruptcy experience.