Going through personal bankruptcy is scary enough. When you’re a small business owner, there’s even more at stake.
You may be wondering what will happen to your business if you’re forced to declare bankruptcy. There are several possible answers to this question, and it varies case to case. But it does largely depend on the type of bankruptcy you file. Some or all of your business may be liquidated along with your other assets, but you may be able to work with an attorney to retain your ownership within the bounds of the law.
Here are a few considerations and differences between Chapter 7 and Chapter 13 bankruptcy for the small business owner.
Chapter 7
With this type of bankruptcy, nearly all of your assets are liquidated by the trustee. This includes your business.
Whether you are an owner or shareholder, it’s all fair game. The nuance comes in when the trustee is appraising the value of your business. If you provide a service, and you are the primary expert behind that service, then your business will likely hold less value in your absence. If you’ve acquired property, equipment or inventory, however, it might be more valuable.
There are alternatives to liquidating the assets of your business; talk to your attorney to find out how.
Chapter 13
With Chapter 13 bankruptcy, most debtors are able to retain their assets rather than handing them over to the trustee for liquidation. This includes your business.
However, the value of your business will come into play when it’s time to determine a payment plan under Chapter 13. The more valuable your business is, the more income you’ll have, which may influence the amount you’re contributing to your plan.
As always, an attorney can help you navigate this delicate situation. Give us a call to find out more about bankruptcy and your business.
