Lancaster Small Business Bankruptcy Lawyers
Small business owners are buffeted by all the same economic turbulence as larger firms. Due to rising costs and supply chain bottlenecks, many small business owners are struggling to stay afloat. When the debt load gets too high, bankruptcy is an excellent option.
At Wadhwani & Shanfeld, we have worked with many sole proprietors, partnerships, and LLCs to get rid of debt through bankruptcy. There are several options, and you need to pick the correct one for your company. Reach out to our Lancaster small business bankruptcy lawyer today.
What Are the Bankruptcy Options for a Small Business?
Small businesses come in different shapes and sizes. The best bankruptcy option will depend on various factors:
- Your entity form: Are you a sole proprietor, S corporation, LLC, partnership, or some other form?
- The future of your business: Do you intend to shut down (liquidate) or hope to stay in business and reorganize debt? If you stay open, do you want to take on more debt?
- Your current debt load: Certain bankruptcy options have debt limits, which can limit your options.
- Your type of debt: Did you take a second mortgage or line of credit on your home to finance your business?
A key consideration is your business form. If you are a sole proprietor, then your business isn’t legally distinct from you personally. That means you can file for Chapter 7 and eliminate debts—but you could also lose personal assets along the way. Helpfully, California has a generous list of exemptions, which will keep them from the trustee. But you should work closely with a Lancaster bankruptcy lawyer to determine what you might lose if you choose Chapter 7. This is not the right option for everyone.
The owners of partnerships, LLCs, and small corporations have similar considerations. For example, partners are typically personally liable for partnership debts. A Chapter 7 can eliminate the partnership’s debt, but the individual partners are still on the hook. Small business owners will typically look at other options.
Congress has recently amended the Bankruptcy Code to create a small business Chapter 11 option. This is a reorganization bankruptcy that allows your business to continue operating as you work out debt. You will propose a debt reorganization plan, which should treat your creditors fairly and equitably. Under most plans, you pay back a percentage of the debt and, at the end of the bankruptcy, the rest is discharged.
A Chapter 11 small business bankruptcy is a new option, but it might be just what you need if you don’t want to shut down. Other options include the regular Chapter 11 or a chapter 13. You should carefully review all possibilities and select the one that is most appropriate for your business.
We Are Board-Certified Bankruptcy Specialists
Wadhwani & Shanfeld has helped more than 25,000 individuals and investors clear debt and turn over a new page. You owe it to yourself and your business to obtain expert legal advice about your options. Call our law firm today.