Starting a small business can be risky. You have a fifty-fifty chance of surviving over a five year period. If you are one of the unlucky ones who is facing a mountain of debt without much hope of recouping your losses, you have some decisions to make. You might be able to sell off the real estate and then sell the personal property piecemeal. You could also consider a business bankruptcy TN owners have used to their advantage in the past. Your next decision is choosing either Chapter 7 or 13.
You may file chapter 7 personally or as the owner. If you are a sole proprietor, you will have to file as an individual because the IRS doesn't make a distinction between you and your company. A lot of owners file both ways. The discharge of business bankruptcies doesn't wipe out personal responsibility for company debts.
The advantage of Chapter 7 for sole proprietors is the ability to eliminate debt with one filing. They are allowed to exempt assets and can continue to operate their businesses. The advantage for a corporation, that wants out of a failing business, is the opportunity to walk away and let the trustee handle the liquidation of assets and repayment of creditors.
There are disadvantages to Chapter 7 filing for corporations. Their debts won't be discharged as a result of this action, and the company will be shut down. A company filing doesn't allow for exemption of assets. It won't wipe out personal debt. It is a good option for those who want out of a company, who have few company assets and aren't personally liable for company debts.
LLCs, partnerships, and corporations don't have the choice of filing Chapter 13 at all. It is reserved for sole proprietorships and individuals. It is possible for a sole proprietor to file personally and eliminate company and personal debts at one time.
If you haven't given up on the business and want a fresh start, Chapter 13 could be a good option. You can retain your assets and keep the company running while you set up a repayment plan. If you had filed Chapter 7, and had more assets than allowable exemptions, the trustee would have sold some of your assets. Filing Chapter 13 eliminates that problem. You can use Chapter 13 to wipe out company debts you are personally responsible for, even if the company is operating as a corporation.
The biggest drawback for businesses is that Chapter 13 is reserved for individuals. Chapter 13 isn't a quick process for those with repayment plans. Those can take up to five years to complete. If you have assets you can't exempt, you are required to pay unsecured creditors an amount equivalent to their face value. Even though you eliminate personal debt with Chapter 13, the company debt will still exist.
Bankruptcies aren't pleasant prospects. They should be a last resort. Before you take such a drastic step, you need to weigh all your other options. Only after you have exhausted those should you consider Chapter 7 or 13, and then you need to consider how it will affect your reputation and your future.
You may file chapter 7 personally or as the owner. If you are a sole proprietor, you will have to file as an individual because the IRS doesn't make a distinction between you and your company. A lot of owners file both ways. The discharge of business bankruptcies doesn't wipe out personal responsibility for company debts.
The advantage of Chapter 7 for sole proprietors is the ability to eliminate debt with one filing. They are allowed to exempt assets and can continue to operate their businesses. The advantage for a corporation, that wants out of a failing business, is the opportunity to walk away and let the trustee handle the liquidation of assets and repayment of creditors.
There are disadvantages to Chapter 7 filing for corporations. Their debts won't be discharged as a result of this action, and the company will be shut down. A company filing doesn't allow for exemption of assets. It won't wipe out personal debt. It is a good option for those who want out of a company, who have few company assets and aren't personally liable for company debts.
LLCs, partnerships, and corporations don't have the choice of filing Chapter 13 at all. It is reserved for sole proprietorships and individuals. It is possible for a sole proprietor to file personally and eliminate company and personal debts at one time.
If you haven't given up on the business and want a fresh start, Chapter 13 could be a good option. You can retain your assets and keep the company running while you set up a repayment plan. If you had filed Chapter 7, and had more assets than allowable exemptions, the trustee would have sold some of your assets. Filing Chapter 13 eliminates that problem. You can use Chapter 13 to wipe out company debts you are personally responsible for, even if the company is operating as a corporation.
The biggest drawback for businesses is that Chapter 13 is reserved for individuals. Chapter 13 isn't a quick process for those with repayment plans. Those can take up to five years to complete. If you have assets you can't exempt, you are required to pay unsecured creditors an amount equivalent to their face value. Even though you eliminate personal debt with Chapter 13, the company debt will still exist.
Bankruptcies aren't pleasant prospects. They should be a last resort. Before you take such a drastic step, you need to weigh all your other options. Only after you have exhausted those should you consider Chapter 7 or 13, and then you need to consider how it will affect your reputation and your future.
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