Closing Your Business Due To Bankruptcy? Know Your Options!

May 16, 2012 by  Filed under: Bankruptcy 

If you find yourself closing a business because of economic hardship or bankruptcy it is important to understand the potential options that may be available to you. Even the most successful business has probably faced financial difficulty at one time. Financial challenges can arise when the economy suffers or if a marketing endeavor or business plan fails.

If your business is in serious financial trouble you need to decide what your solution will be.

1. Borrow more money to save your business

2. Stop paying your debts and default on your loans

3. File for bankruptcy on behalf of your business

Unfortunately obtaining more financing for your business is not an easy thing to do. And if your business plan needs work it will be an even bigger challenge. And if you intend to stay in business you cannot stop paying bills or default on loans. It will signify the beginning of the end.

Bankruptcy is going to be the most realistic way to stop creditor phone calls but you will lose much of your financial credibility.

When you file bankruptcy for a business you have the option of filing chapter 7, chapter 11 or chapter 13 bankruptcy. For your business bankruptcy may mean that your business closes immediately while others may stay open through bankruptcy and beyond.

The different types of bankruptcy will mean different things for your business:

Chapter 7 – If you are filing bankruptcy and intend to close the doors of your business for good you will likely file chapter 7 bankruptcy. Chapter 7 is often referred to as “liquidation” because as part of the process all the assets of the business will be sold and the money garnered with help pay off creditors.

Chapter 13- If your business is a sole proprietorship it can qualify for chapter 13 bankruptcy however a corporation cannot file this way. The reason being is that with a sole proprietorship the owner is actually filing bankruptcy as an individual with business debts that they are personally liable for.

Chapter 11- Chapter 11 can be filed by any business including a corporation. It has similar characteristics to chapter 13 bankruptcy for individuals. With chapter 11 a business can re-organize debts and pay them off over time. They will be given approximately 6 years to pay of the debts.

When deciding to file bankruptcy for your business the most important question to ask yourself is if you want to keep the business open or if you’re ready to close down. In contrast if you are an individual who wants to file for bankruptcy you will also have to consider that filing chapter 7 as an individual will likely means you have to close your business. If your business is an LLC or a corporation you may be able to keep the doors open.

Whatever bankruptcy you decide to file it is important to talk through your options with a qualified bankruptcy attorney. They will understand the system as well as specifics that depend on your state such as filing procedures. It is always wise to discuss your case with an attorney who is located in the state where you are filing.

Bankruptcy can be stressful. An attorney can help the process move smoothly and as quickly was possible.

The Chicago bankruptcy lawyers of Chang & Carlin handle chapter 7 & chapter 13 bankruptcy, real estate and foreclosure law services as well as tax and IRS legal issues. Learn more about these services and request a free consultation today: http://www.changandcarlin.com/

Article Source:
http://EzineArticles.com/?expert=David_Chang

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