What Happens to My Small Business if I File for Bankruptcy?

Business owner bankruptcy

I am often asked, “What happens to my small business if I file for bankruptcy?” And the answer I always give is, “Well, it depends on a number of factors.”

These factors include the chapter under which a business owner files their personal bankrupty, whether or not the business has valuable assets, whether the business has debts, whether the business has pledged its assets to its creditors, and whether the business has enough ongoing revenues to pay its monthly expenses.

In a Chapter 7 bankruptcy, the value of the debtor’s interest in the busienss, like any other asset, is subject to being evaluated and sold by the Chapter 7 Trustee. In a Chapter 13, the value of the debtor’s interest in the business is subject to being evaluated, but the it cannot be liquidated by a Chapter 13 Trustee. Instead, if the business interest has value, the debtor retains the business interest and can continue to operate the business in exchange for paying to creditors (over the life of the Chapter 13 plan) the value of the debtor’s business interest as of the date of the filing of the bankruptcy petition.

Because a business owner can be 100% sure that their buisness cannot be touched by the court in a Chapter 13 bankruptcy, this is chapter that most business owners choose to file. To learn more about Chapter 13, visit my web page here.

To learn more about filing a persoanl bankruptcy as a small business owner, see my youtube video here.

To learn more about why a Chapter 7 Trustee may demand money from you, see my previous blog post on the subject here.

If you are experiencing financial difficulties, call my office to reserve your free, comprehensive, confidential confirmation.

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