Declaring bankruptcy as a small business owner can be a daunting decision to make. Exploring the types of bankruptcy options available for small business owners along with the pros and cons may help with this decision. Knowing what to expect from bankruptcy will provide the information needed to choose. You can also consult with a Kingsport bankruptcy attorney about your options.
How Bankruptcy Works for Small Businesses
As a small business owner, you have multiple options for escaping debt through bankruptcy. The types of bankruptcy for small businesses include Chapter 7 bankruptcy, Chapter 13 bankruptcy, and Chapter 11 bankruptcy. Each type of bankruptcy comes with different methods for escaping debt along with different pros and cons.
Chapter 7 bankruptcy is for sole proprietorships. In other words, this is for businesses owned and run by one person. What Chapter 7 bankruptcy does is sell off property to pay back debt. This may not mean all business or personal property. Some properties are exempt from being sold off. The con is ending the business.
Chapter 13 bankruptcy is also for sole proprietorships. The difference here is that Chapter 13 bankruptcy may not always end the business because this process involves a more affordable payment plan. As long as the new payment plan is followed, the debts can be erased. One of the pros is keeping your business going.
The way Chapter 11 bankruptcy works is by allowing sole proprietorships and partnership businesses to reorganize the debt owed to creditors. Some pros include a more affordable debt repayment plan and being able to continue running the business afterward.
Pros and Cons of Small Business Bankruptcy
You might be wondering what the pros and cons of bankruptcy for small businesses are overall. The pros of bankruptcy for small business owners are finally being able to escape crushing business debt. Bankruptcy options allow you to either end the business by selling assets or keep the business running with a new repayment plan.
Selling assets and closing down the business might be seen as cons for some small business owners. This depends on which problems are bigger. Other cons of bankruptcy in general include a lower credit score and bankruptcy being on credit reports for seven to 10 years. Not everyone realizes that bankruptcy may not erase all debt.
The pros of bankruptcy are escaping large portions of debt, lowering the payments, and potentially being able to continue or restart the business. You may not lose all your financial assets and property because some are exempt. Bankruptcy laws protect you from being discriminated against for filing bankruptcy. Lastly, bankruptcy might be less severe in the long run than continuing to deal with growing debt and late fees.
Contact Tom Bible Law Today
Deciding whether to file for bankruptcy as a small business can be challenging. Feel free to call us at Tom Bible Law today at (423) 424-3116 for a consultation about your options for bankruptcy. Our legal team of Tennessee bankruptcy lawyers is ready to explore your legal steps for small business bankruptcy. We serve clients throughout the Tennessee cities of Chattanooga, Kingsport, and Tullahoma.