As the economy recovers, small businesses are still struggling under mounting debts incurred during the recession in Sacramento, Stockton, Fairfield, and Modesto, California.
If your small business is a sole proprietorship, you might be able to save your business through Chapter 7 or 13 Bankruptcy. Under Chapter 7 Bankruptcy, you can wipe out your business and personal debts. However, if you have business assets that are above what the California Exemptions will protect or/and your income is too high under the Bankruptcy guideline, you should file a Chapter 13 Bankruptcy “reorganization” plan to restructure your debts and keep your business. Contrary to some beliefs, you can continue operating your Business under Chapter 13 Bankruptcy. Restructuring your business and personal debts under Chapter 13 Bankruptcy does NOT mean you have to pay 100% of your debt back. You can pay just a fraction of your debt depending on the value of your assets and income.
However, if your small business is a corporation, LLC, or partnership, you cannot file a Chapter 13 Bankruptcy. You can file Chapter 7 Bankruptcy on behalf of your business. Chapter 7 Bankruptcy is liquidation and is used primarily to shut down and liquidate corporation, LLC, or partnership because the business cannot use exemptions and does not receive a discharge. This is used when small business owner does not want to liquidate business assets and negotiate with creditors but would rather have the Bankruptcy Trustee deal with such issues. Chapter 7 Bankruptcy for corporation, LLC, or partnership does not eliminate personal obligation or guarantees of business debts. You would have to file a personal Chapter 7 Bankruptcy to wipe out your personal obligation or guarantees of business debts. You can use personal Chapter 13 Bankruptcy to wipe out your personal obligation or guarantees of business debts if you do not qualify for Chapter 7 Bankruptcy.
Keep in mind anything posted in this website are a brief overview of Bankruptcy Law and are not meant to be taken as legal advice. Bankruptcy Law is complex and every case is unique. There is no such thing as cookie cutter solution for every Bankruptcy case. You should consult an experienced Bankruptcy Attorney for advice. Our Bankruptcy Attorney Offices are located in Sacramento, Stockton, and Fairfield, California for small business bankruptcy consultations.