Bankruptcy Can Help Small Business Owners with Debt Relief
Small business owners who have financial struggles can benefit from the U.S. Bankruptcy Code. Recently our office had a client who had decided to shut down operations of his business.
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Aug. 29, 2012 - PRLog -- Small business owners who have financial struggles can benefit from the U.S. Bankruptcy Code. Recently our office had a client who had decided to shut down operations of his business. Although, our client had decided no longer to operate, he had many personal guarantees on lines of credit that he had used to operate his small business. His total debt was roughly $800,000.00. After meeting with him and analyzing the business and finances, we decided that a personal Chapter 7 Bankruptcy was the best option. A Chapter 7 Bankruptcy would offer the small business owner the opportunity to have all his unsecured debts including personal guarantees on credit lines, discharged at the completion of his case. A Chapter 7 Bankruptcy was the best option for the small business owner because of several reasons. First after researching the client’s assets, we decided a Chapter 7 Bankruptcy would allow a court supervised liquidation of business assets that were non-exempt for the benefit of the creditors. This would keep angry creditors at bay, because liquidation of non exempt assets is court supervised and orderly. Fortunately in our client’s case, we were able to exempt all business assets and the creditor’s received nothing. Second, a Chapter 7 Bankruptcy was a fairly quick process to help facilitate the shut-down of the business. The small business owner was able to essentially walk away and let the trustee and creditors sort out the process. In four months our client received his discharge of the debts. Another situation in which it makes sense to file bankruptcy is if you want to continue to operate the business and receive some relief on your debts. Typically if the small business owner operates a service or is a general contractor, the trustee will not force a shutdown of the business and the individual is able to receive a discharge and continue to operate. However, if the business is a retail store or the business may contain a large amount of liability the trustee may wish to temporarily close or possibly take over the business. For example, a retail store may have a large amount of non exempt property or equipment and the creditors would benefit from having the business shut down and the assets liquidated. Therefore, it is important to speak to a bankruptcy attorney regarding what you want to accomplish and the type of business and assets of the business.
With careful planning a small business owner can walk away debt free.