Los Angeles Small Business Bankruptcy Lawyers
Small business owners face a challenging economic climate, including exploding costs and labor shortages. At some point, many owners realize that it’s no longer feasible to pay their debts. This is when it’s time to call a Los Angeles small business bankruptcy lawyer at Wadhwani & Shanfeld. We have helped thousands of business owners manage their debts and are eager to help you explore your options.
What Are the Bankruptcy Options for Small Business Owners?
The right bankruptcy will depend on many factors, such as your business or entity form. Most small businesses are sole proprietorships, partnerships, LLCs, or S corporations. These are very different entities. For example, a sole proprietorship is not legally distinct from you as the owner. This means that you can include personal debts in your bankruptcy, but it also means you might lose personal assets, like your home or even cash in a bank.
Similarly, partners are usually personally liable for partnership debts, but that’s not true for the owners of an LLC. Another consideration is whether you want to continue your business or have decided to close up shop.
Let’s look at some options:
Chapter 7 Liquidation
If you intend to shut your business down, then a liquidation is the fastest and easiest way to do so. It plays out differently, depending on your business form. For corporations and LLCs, the trustee will sell all your business assets. If you are a sole proprietor, then you can lose personal assets if they are not exempt. We strongly encourage you to meet with an attorney before filing for Chapter 7 because this is not the right choice for all business owners.
Chapter 11 Reorganization
If you want to continue to run your business, then a reorganization might be the choice for you. You can continue to operate while submitting a reorganization plan for your debt. In most cases, a small business pays back a portion of the debt owed to their creditors but will eliminate other debt. Chapter 11 has a small business option in subchapter 5, which has made this an attractive option for many businesses.
Chapter 13 Wage Earner’s Bankruptcy
A sole proprietor might use a Chapter 13 bankruptcy if they have a regular source of income. Unlike a Chapter 7, you do not liquidate your assets. You instead make regular payments over 3-5 years to your creditors based on your disposable income. Once you complete the bankruptcy, unpaid debts are eliminated. Chapter 13 is only an option for sole proprietors.
Consult Our Business Bankruptcy Lawyer
A small business owner’s choice of bankruptcy matters a great deal. If you select the wrong option, you could lose personal assets or ultimately end up deeper in debt. An experienced Los Angeles bankruptcy for small business owners lawyer is your best guide to navigating the process. Call us today to schedule a meeting. We can review your business goals, your entity structure, and your debts. If hired, we can also guide your case through the entire process.