It’s no secret that small businesses often fail. No matter how great of an idea you had, if the community simply is not interested, it can become very difficult to keep the doors open. The end of a business does not have to be the end of you, however. There are options to get a fresh start. Businesses have four different bankruptcy options to settle their debts and move on.
The first is chapter 7. Similar to chapter 7 bankruptcy for individuals, this option allows a business to liquidate their assets to pay off their debts. The most common users of chapter 7 bankruptcy are those sole business owners who simply did not get off the ground and do not really have a successful future before them.
Next is chapter 11. If your business has been pretty successful, but now you’ve hit a rough patch, chapter 11 may be the way to go. Corporations and partnerships can reorganize their debts, making smaller payments over a longer amount of time in order to stay afloat.
Similarly, chapter 13 also allows you to refinance your debts. You may recognize this as a personal bankruptcy option as well. Keeping that in mind can help you separate this from the previous option. While chapter 11 is for larger operations, chapter 13 is for sole business owners.
Finally, chapter 12 is a specialized form of bankruptcy. It is specially designed for family agricultural businesses who have regular cash flow, but just not enough to cover the debt. Similar to chapters 11 and 13, chapter 12 refinances the debt to make payments easier.
Figuring out which chapter of business bankruptcy is right for you often takes a keen legal eye. If you feel you are getting in over your head with business debt, contact a qualified attorney who is experienced in this area.