As the economy recovers, small businesses are still struggling under mounting debts in Sacramento, Stockton, and Fairfield 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.
If I Operate a Business and I Filed for Bankruptcy, Am I Required to Stop Business Operation?
If I operate a business and I filed for Bankruptcy, am I required to stop business operation?
The answer depends on who is filing for bankruptcy.
If the bankruptcy filer is a corporation, limited liability company, or partnership, it must stop business operation immediately upon filing Chapter 7 Bankruptcy. Corporation, limited liability company, and partnership cannot use the California exemptions to prevent Chapter 7 Bankruptcy Trustee from liquidating business assets of value.
If the corporation, limited liability company, or partnership wants to continue business operation and restructured their debts, they should consider a Chapter 11 Bankruptcy, which can be very expensive. Unfortunately, corporation, limited liability company, or partnership cannot file for Chapter 13 Bankruptcy.
If the bankruptcy filer is a person operating under a sole proprietorship, he or she can continue business operation unless the Chapter 7 Bankruptcy Trustee says otherwise. If the business assets are exempted by the California exemption and or encumbered by liens so that they the business assets are immaterial in value, the Chapter 7 Bankruptcy Trustee would not liquidate the business assets. The Chapter 7 Bankruptcy Trustee is more likely to allow debtor’s to continue business operation if you maintain all business insurance so that the Chapter 7 Bankruptcy Trustee will not be held liable if a third party is injured on business premises or by debtor’s business activities. Muoi Chea, an experienced Sacramento Bankruptcy Attorney can advise you before you file for Bankruptcy.
If the sole proprietor is concerned about material business assets that are valued in excess of the California exemption and the lien balance and want to continue business operation by restructuring his or her business and or personal debts, the debtor should consider Chapter 13 Bankruptcy. Under Chapter 13 Bankruptcy, the sole proprietor does not have to worry about the Chapter 13 Bankruptcy Trustee liquidating his or her assets. Instead, the debtor will repay creditors under a 36 to 60 months payment plan. This doe NOT mean that debtor has to repay 100% of the business and or personal debts. You can end up paying as little as 1% of your business and personal debts. How much you must repay in a Chapter 13 Bankruptcy depends on your income, reasonable and necessary expenses, and assets. Muoi Chea Sacramento Bankruptcy Attorney can calculate your total Chapter 13 Bankruptcy plan payment over the phone.
Keep in mind anything posted in this website is 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.
Sacramento CA 95814
Stockton CA 95207
Fairfield CA 94533