Los Angeles Small Business Bankruptcy Lawyer
When a small business in Los Angeles County fails, the owner’s own name is often on the paperwork: a personal guarantee on the lease, a signature on the equipment loan, a credit card opened under a sole proprietorship. That is why a Los Angeles small business bankruptcy lawyer has to look at two balance sheets at once, the company’s and the owner’s. Wadhwani & Shanfeld is a consumer bankruptcy and debt relief law firm that handles small business bankruptcy and business debt solutions for owners across Los Angeles, Orange, Riverside, and San Bernardino Counties.
The right filing depends heavily on how the business is organized. A sole proprietor and the business are legally the same person, so the debts come into the personal case together. An LLC or corporation is a separate entity, and a bankruptcy for the company does not wipe out what the owner personally guaranteed. Getting that distinction right at the start decides whether a filing actually solves the problem.
Owners often wait until a landlord lawsuit, a bank levy, or a vendor judgment forces the issue. By then, options narrow quickly. A conversation with an attorney while you still have choices usually costs less and protects more.
Why Choose Wadhwani & Shanfeld for Small Business Debt Problems
Wadhwani & Shanfeld has helped more than 30,000 individuals and families resolve debt across Southern California, including small business owners whose company debts have spilled into their personal finances. The firm is led by two Board-Certified Specialists in Consumer Bankruptcy through the American Board of Certification, with more than 90 years of combined legal experience. Clients get direct access to an attorney from the first call, free consultations, and the choice of meeting in person or handling the entire case by phone, email, video, or online chat, including 100% virtual consultations.
Raj Wadhwani, founding shareholder and partner, is a Southwestern Law School graduate who helped pilot the Best Case Bankruptcy software in 1998 and was the first attorney to file a bankruptcy case electronically in the Central District of California. Greg Shanfeld, founding shareholder and partner, earned his law degree from the University of Southern California and has handled more than 10,000 bankruptcy cases over three decades. That depth matters when a business case involves a trustee asking hard questions about inventory, receivables, or transfers made before filing.
Because the firm handles Chapter 7, Chapter 13, debt settlement, IRS tax debt, creditor lawsuits, and loan modification, the recommendation comes from what fits your situation, not from the only tool on offer. When action is needed fast because a garnishment, foreclosure sale, or repossession is days away, the firm moves quickly. It files in every division of the U.S. Bankruptcy Court for the Central District of California.
Business Debt Situations We Handle for Los Angeles Owners
- Sole Proprietorships: The owner and the business are one legal person, so business loans, supplier balances, and personal credit cards all land in a single personal bankruptcy. Chapter 7 or Chapter 13 can address the whole picture.
- Personally Guaranteed Business Loans: Closing an LLC or corporation does not erase a personal guarantee. The lender can pursue you individually, and a personal filing can discharge that guarantee when it is unsecured.
- Business Credit Cards and Lines of Credit: Cards opened in the owner’s name, or guaranteed by the owner, are treated like any other unsecured consumer-type debt in many cases and are commonly eliminated in Chapter 7.
- Commercial Lease Claims: Landlords of closed restaurants, salons, and retail shops often sue the guarantor for remaining rent. Filing stops the suit and any judgment enforcement while the claim is sorted out.
- Merchant Cash Advances and Vendor Judgments: Daily-debit advances can drain an account quickly, and a vendor judgment can lead to bank levies. The automatic stay halts both once a petition is filed.
- Business Tax Debt: Some older income tax debt can be eliminated if it meets specific timing rules, while priority tax debt may be better handled in a Chapter 13 repayment plan or through representation with the IRS.
- Struggling but Salvageable Businesses: Sometimes the better answer is not bankruptcy. Debt settlement and direct negotiation with creditors can reduce what you owe while the business keeps operating.
What to Do When the Business Is Sinking and Creditors Are Closing In
Start by sorting your debts into three piles: what the company owes alone, what you guaranteed personally, and what is in your own name. Gather the loan agreements, the lease, any personal guarantee pages, recent bank statements, tax returns, and every lawsuit or demand letter. The guarantee language often determines what a creditor can reach.
Do not ignore a lawsuit. In California, an expired limitations period is a defense, but you have to raise it in a written answer or the court can still enter judgment. For reference, written contract and book account claims generally carry four years to sue, while oral contracts carry two. A payment on a time-barred debt does not revive it, and only a signed written acknowledgment can restart the clock, so be careful about promising anything to a collector over the phone.
Be cautious about moving money around. Paying one friendly creditor in full, shifting assets to a relative, or draining accounts shortly before filing can be undone by a bankruptcy trustee and may put your discharge at risk. Tell your attorney about any recent transfers up front so they can be handled properly.
Watch the deadlines that creditors control. A bank levy can freeze an account, though California automatically protects a limited amount in a deposit account without a claim of exemption. A money judgment in California is enforceable for 10 years and can be renewed. If a foreclosure on a home or a repossession of a vehicle is in motion, the clock is shorter: a trustee’s sale cannot occur until at least three months and 20 days after the notice of default is recorded, and a repossession notice must give at least 15 days before a vehicle is sold. Filing a bankruptcy petition triggers the automatic stay immediately, which halts lawsuits, levies, garnishments, repossessions, and foreclosure proceedings.
Where you file depends on where you live. The Central District of California has several divisions, and the street address of your residence, not a P.O. box, determines which one handles your case. Los Angeles County owners may land in the Los Angeles Division, which serves most of the county, or the San Fernando Valley Division in Woodland Hills, which covers communities such as Sherman Oaks, Encino, Van Nuys, Northridge, and Reseda. Owners in Orange County file in the Santa Ana Division, and those in Riverside and San Bernardino Counties file in the Riverside Division. Confirming the right division before filing avoids delay. Debt collection suits themselves are heard in the Los Angeles County Superior Court, which runs through twelve geographic districts.
Chapter 7 or Chapter 13 for a Business Owner
Chapter 7 wipes out qualifying unsecured debt, usually in about four months. It requires passing the means test, which compares your household income to the California median for your household size. A subtle point for owners: business debts can matter here, because the test looks differently at income depending on whether your debts are primarily consumer or business in nature. Your attorney should analyze this before you file, not after.
Chapter 13 reorganizes your debts into one monthly payment over three to five years and binds creditors once the court confirms the plan. It suits owners with steady income who are behind on a mortgage or car loan, owe priority tax debt, have income above the Chapter 7 limits, or hold assets they want to protect beyond what exemptions cover. Self-employed filers should expect to document income carefully, since irregular earnings draw scrutiny.
Protecting property is the other half of the analysis. California does not use the federal exemptions. You choose between two state systems for the whole case: one with a substantial homestead exemption that often favors homeowners, and another with a flexible wildcard that often suits renters. That second system also includes an allowance for tools of the trade, which matters to contractors, mobile service providers, and anyone who earns a living with equipment. You generally must have lived in California for at least 730 days to use these exemptions. Most of our clients keep everything they own, and every available exemption is worked through before filing.
Questions Small Business Owners Ask About Bankruptcy
Can I file bankruptcy if my business is an LLC or corporation?
You can, but a business entity bankruptcy is a different animal from a personal one. An entity case does not discharge what you guaranteed personally. Many owners find that a personal filing, sometimes alongside winding down the company, resolves the debts that actually threaten them.
If I close the business, do I still owe the debts?
Closing a company does not erase debts you personally guaranteed, and a creditor can still sue you. Unguaranteed company debts generally remain the company’s problem, but the lender or landlord may look to you if you signed individually.
Will a bankruptcy let me keep my business tools and equipment?
Often yes. California’s exemption systems protect tools of the trade up to a set amount, and a Chapter 13 plan can protect additional assets. We review every item before filing to see what is covered.
Can a landlord keep suing me for rent after I file?
No. The automatic stay halts the lawsuit and any collection effort as soon as the petition is filed. The landlord’s claim is then handled within the bankruptcy, and if it is unsecured and dischargeable, it can be eliminated.
Do I have to give up my home to pay business creditors?
Most filers keep their homes. In Chapter 7, the question is whether your equity is protected by California’s homestead exemption. If you have more equity than the exemption covers, or you are behind on the mortgage, Chapter 13 lets you keep the home and catch up over time.
What if the IRS is after the business?
It depends on the type of tax and its age. Some older income tax debt can be discharged if it meets the timing rules, while other tax debt is better addressed through a payment arrangement or a Chapter 13 plan. Our attorneys also represent clients with the IRS to stop levies and set up payment agreements.
Is a collector’s lawsuit against me over a business debt still worth fighting?
Often it is. Check whether the limitations period has expired and whether the plaintiff can actually prove the debt. A written answer is required to preserve defenses. California’s Rosenthal Act also covers original creditors and not just third-party collectors, and a consumer who prevails can recover attorney fees.
Can my bank account be emptied by a judgment creditor?
A levy can freeze a business or personal account, though California automatically protects a limited amount in a deposit account without a claim of exemption. That protection does not cover levies for wages owed to another, support, or debts owed to the state. Filing bankruptcy stops most levies immediately.
Can I use bankruptcy to stop a wage garnishment on my own paycheck?
Yes. Filing Chapter 7 or Chapter 13 stops most garnishments when the case is filed. An ordinary judgment garnishment is capped by statute, and Labor Code section 2929 prevents an employer from firing you because of a garnishment on a single judgment.
How long will bankruptcy affect my ability to borrow for a new venture?
Chapter 7 can remain on a credit report for up to 10 years from filing, and Chapter 13 is typically removed after 7 years, but the impact fades well before then. Many clients rebuild by using a secured card responsibly and paying every bill on time. Lenders vary, so planning ahead helps.
Will my customers or employees find out?
Bankruptcy filings are public court records, but there is no automatic notice to your customers or employees. People connected to the debts, such as creditors, may be notified directly as part of the process.
Do I have to come into the office to get started?
No. We handle cases fully by phone, email, video, and online chat, and 100% virtual consultations are available for owners who cannot step away from the business.
Serving Small Business Owners Across Los Angeles County and Beyond
We represent business owners throughout Los Angeles County, from the city of Los Angeles and Hollywood to Santa Monica and the Westside, and across the San Fernando Valley in Sherman Oaks, Encino, Woodland Hills, Van Nuys, Reseda, Northridge, Granada Hills, North Hollywood, North Hills, Mission Hills, San Fernando, and Sylmar. We also serve Santa Clarita, Long Beach, Lakewood, Torrance, Compton, Inglewood, Gardena, Norwalk, Bellflower, Paramount, Cerritos, Cypress, Signal Hill, Huntington Park, and the Antelope Valley communities of Lancaster, Palmdale, and Acton.
Our reach extends into the eastern San Gabriel Valley and the Inland Empire, including Pomona, Claremont, Glendora, West Covina, Chino, Chino Hills, Montclair, Upland, Rancho Cucamonga, Ontario, Fontana, San Bernardino, Riverside, and the Coachella Valley. In Orange County, we help owners in Anaheim, Santa Ana, Garden Grove, Buena Park, Fullerton, Huntington Beach, Westminster, Costa Mesa, Newport Beach, Tustin, La Habra, Placentia, Mission Viejo, and Laguna Niguel.
Talk to a Los Angeles Small Business Bankruptcy Attorney Today
You do not have to wait for the next lawsuit, levy, or lease demand to find out where you stand. A Los Angeles small business bankruptcy attorney at Wadhwani & Shanfeld can review your business debts, your personal guarantees, and your property, then explain every option inside and outside of bankruptcy and tell you honestly which one fits. Call for a free consultation and speak directly with an attorney, in person or entirely online.
