Is Bankruptcy the Right Choice for My Small Business?
When you own a small business and the income you earn from it is inadequate to repay your creditors, you might wish to consult with a small business bankruptcy attorney about your financial options. At CMC Law, we understand that it is often difficult for a small business owner to distinguish where business life stops and personal finances begin. Bankruptcy of a small business can often mean that the individual who owns the business should also declare bankruptcy. Our attorneys can help you understand if this is the best thing to do in your current situation.
Which Type of Business Bankruptcy Should You File?
As a business owner facing financial difficulty, you need to decide whether it is more effective to file business bankruptcy or personal bankruptcy. After your small business bankruptcy attorney helps you decide on this, you also need to consider whether Chapter 7 bankruptcy or Chapter 11 bankruptcy is in your best interest.
Chapter 7 bankruptcy is an effective bankruptcy tool for a person who owns a small business when the owner’s financial interests are intertwined with the business. Most small business owners are required to personally guarantee business loans, so filing bankruptcy for the business alone will not relieve the individual owner of his or her obligation to pay the debt. In situations where the business is failing or has already failed to earn income, it may be a better choice for the owner to close the business and file Chapter 7 individually to wipe out his or her personal liability on the business debt.
Federal law requires people filing for Chapter 7 bankruptcy protection to earn below the median income for their state. This is called the means test. In Georgia, a single filer cannot earn more than $40,631 per year. You will also need to meet certain criteria for assets and debts in order to qualify.
If the business is looking to restructure and continue with its business activities, Chapter 11 bankruptcy may help accomplish this objective. Chapter 11 bankruptcy allows business owners to pay off business debts over an extended period of time by restructuring the business and repaying debts using the revenue generated by the business.
The bankruptcy court does not apply any debt limits for business owners filing Chapter 11 bankruptcy. Additionally, it does not require the appointing of a trustee to handle your cash or run your business. The only time this would occur is when the bankruptcy judge felt you were mishandling your business and deliberately not complying with bankruptcy law. As long as you do everything required of you, the bankruptcy judge will provide you with several months to file a debt reorganization plan.
Schedule a Consultation with a Small Business Bankruptcy Attorney
A qualified small business bankruptcy attorney can work with you to determine what works best in your circumstances. If you are a small business owner and are considering filing bankruptcy in Atlanta, Georgia, contact CMC Law at 404.585.0040 to schedule a free initial consultation.
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