Small Business Bankruptcy has become a much discussed topic recently at my office. COVID-19 causes many small businesses to lose revenues and accumulate debts. Filing for small business bankruptcy may be an option you should consider.
Small Business is a Sole Proprietorship
If your small business is a sole proprietorship, you have the option to file for Chapter 7, Chapter 13 or Chapter 11 bankruptcy.
Filing Chapter 7 Bankruptcy for Sole Proprietorship Business
Chapter 7 Bankruptcy is liquidation and involves no payment plan. Therefore, you should take significant care and consideration when choosing Chapter 7 Bankruptcy. For example, if you personally or your sole proprietorship have significant assets that is beyond the protection of the California exemptions law, you risk losing the nonexempt assets. The Chapter 7 Bankruptcy Trustee will confiscate and liquidate nonexempt assets. This becomes a problem if you want to keep those assets. Moreover, your business run the risk that the Chapter 7 Bankruptcy Trustee will take over the operation of your business. This becomes a problem if you want to keep your business and you want to be the sole decision-maker.
Filing Chapter 13 Bankruptcy for Sole Proprietorship Business
Chapter 13 Bankruptcy is a safer choice for those with nonexempt assets or simply do not qualify for Chapter 7 Bankruptcy. You may not qualify for Chapter 7 Bankruptcy due to high income or other factors like a recently discharged bankruptcy case. Chapter 13 Bankruptcy involves a payment plan, so you can keep your nonexempt assets so long as you pay for it in the Chapter 13 plan. Unlike a Chapter 7 Bankruptcy, Chapter 13 Bankruptcy Trustee will not take over the operation of your business.
Chapter 13 Bankruptcy to Catch up on Payments and Keep Car, Business Equipment and Home
Other reasons why you might want to file a Chapter 13 Bankruptcy is you want to put your debts in a payment plan. You can put delinquent car and mortgage payments in the Chapter 13 payment plan. This allows you to try to get caught up. At the same time, you can keep your car, business equipment, and home so long as you make your payments. This is reorganization. Your creditors must accept the Chapter 13 Bankruptcy Plan payment whether they like it or not. The maximum plan term is 60 months.
Chapter 13 Bankruptcy to Repay Priority Tax Debt
You can put priority tax debt in the payment plan. This may be a better option if you have significant tax debts from tax collectors like Internal Revenue Service, Franchise Tax Board or California State Board of Equalization (aka California Department of Tax and Fee Administration).
Filing Chapter 11 Bankruptcy for Sole Proprietorship Business
Another option if Chapter 13 Bankruptcy and Chapter 7 Bankruptcy is not a viable option is Chapter 11 Bankruptcy. Like Chapter 13 Bankruptcy, Chapter 11 Bankruptcy is also a reorganization plan that involves a repayment plan. Unlike a Chapter 13 Bankruptcy, Chapter 11 Bankruptcy tends to be more expensive and complicated. As a result, a Chapter 13 Bankruptcy is preferred over a Chapter 11 Bankruptcy in most cases if you qualify.
Small Business is a Corporation or LLC
If your small business is a corporation or Limited Liability Company (LLC), your bankruptcy option is Chapter 7 or Chapter 11 Bankruptcy. Chapter 13 Bankruptcy is not available to business entities. Therefore, it is only available to consumers and sole proprietorship.
Furthermore, even if your corporation or LLC filed for bankruptcy, you may still be personally liable for the business debt. As a result, if you are personally liable, you will also have to file for bankruptcy.
Call experienced Sacramento CA Bankruptcy Attorney for options
For more information, call Muoi Chea who is experienced Bankruptcy Attorney in Sacramento, California. For over a decade, I have a long successful track record of representing consumers and small business owners in Bankruptcy Court. I accept Chapter 7 and Chapter 13 Bankruptcy cases in all of Sacramento County, Elk Grove, Citrus Heights, Folsom, El Dorado, Roseville, Rocklin, Stockton, Tracy, Lodi, Galt, Modesto, Woodland, West Sacramento, Davis, Vacaville, Fairfield, Vallejo, Benecia, Yuba, Sutter, CA and other nearby cities in Northern and Central California. Call for details.
Bankruptcy Law Offices phone numbers:
It is best to call the main Office in Sacramento, CA to schedule an appointment with Bankruptcy Attorney.