Running a small business can be a great source of revenue when the company is successful. You can pay yourself and your employees a competitive salary and possibly make additional money as the owner if the company generates profits.
However, if you encounter major setbacks, the business may become a very expensive burden. You may lose your income and worry about whether you could personally be accountable for some of the business’s financial obligations.
Small business owners, especially those acting as the sole proprietor of a business, may eventually realize that they cannot regain control over their finances without assistance. These entrepreneurs and executives may eventually realize that bankruptcy could be the easiest path out of their financial hardship.
Filing for bankruptcy can be an ideal solution for business debt
Although the business itself might file for bankruptcy, sometimes business owners realize that they will need to file for Chapter 13 bankruptcy as an individual. What are some of the benefits of a Chapter 13 filing?
You can qualify despite earning a competitive income. A Chapter 7 filing for you as an individual may not be an option because there are very strict income limitations for such bankruptcies. Your adjusted income has to be at or below the state median for your household size. A Chapter 13 filing is accessible to even those earning the competitive income of a professional with a small business, like a plumber with a sole proprietorship.
Your assets won’t be at risk in a Chapter 13 filing
A Chapter 7 bankruptcy is a liquidation filing. The trustee overseeing your case will expect you to report all of your major assets so that they can determine if you have property that you can liquidate to help repay your creditors. Any assets that you cannot exempt from liquidation would be vulnerable in your bankruptcy proceedings.
In a Chapter 13 bankruptcy, you will need to make years of structured payments through the courts, which effectively eliminates the need to liquidate any of your property. You can protect your home, your vehicles and your business assets with a successful Chapter 13 filing.
Learning more about the unique features of each kind of bankruptcy can help you decide between personal and business bankruptcy, as well as the best chapter of bankruptcy to seek for your circumstances.