Some individuals and businesses file for bankruptcy in an effort to eliminate all or some of their debt. The federal bankruptcy court offers legal protection throughout this process.
Filing for bankruptcy is often the best option for small business owners who invest their own money into a business that develops financial problems.
Small Businesses Bankruptcy
The most common form of bankruptcy for small business owners is Chapter 7. This is considered a liquidation form of bankruptcy that involves selling the business and its properties and using the proceeds to help pay off the debt.
Other business owners benefit from filing for Chapter 11 or Chapter 13 bankruptcy, which are not liquidation-based and allow the business owner to reorganize the business and repay a portion of his or her debts.
Bankruptcy and Divorce
It is not uncommon for individuals to file for bankruptcy during or after a divorce. The process of splitting a household financially can leave one or both spouses in a delicate financial situation that can be best remedied by bankruptcy.
There are certain restrictions with each chapter and type of bankruptcy, depending on the amount of debt in question and the business owner’s ability to repay that debt. It is important to speak with an experienced bankruptcy attorney before deciding if—and how—filing would benefit you.