Businesses can bring a lot of satisfaction – but they can also be a source of grief. When your income dwindles, your assets seem to disappear into thin air and creditors get anxious, it may very well be time to look into options that allow you to take care of your debt in a more substantial way. Bankruptcy is hardly pleasant and easy, but sometimes, it may just be the key to fixing your financial situation. However, it all depends on the circumstances as to when you should consider filing for bankruptcy as a business.
Every decision to file for bankruptcy begins with an honest appraisal of the state of your business. In some cases, you can manage a financial healing plan that will help you restore your finances to a manageable state, allowing them to survive the upheaval and become successful without the need for a bankruptcy. In other cases, particularly when the sum of your debts exceeds the sum of your assets, bankruptcy may be the only option for getting rid of the debt saddling you down. If that is the case, keep in mind that there were nearly 2 million new bankruptcy filings in 2013 and 2014 – you are not alone.
Of course, if you arrive at the conclusion that bankruptcy is really the only possible exit from your situation, you need to consider the legal ramifications. While it is natural to think of your business as something separate, in the vast majority of cases you’re usually doing business as a sole proprietor, meaning that you are personally liable for all the debts that you incurred. If you declare a bankruptcy, depending on which type of bankruptcy you file and how successful you are, then your personal assets could be at risk.
No bankruptcy consideration is complete without considering the potential for healing your situation. While bankruptcy may be inevitable, you may opt for a Chapter 13 bankruptcy, wherein you restructure your finances and set up a repayment program for your creditors rather than outright liquidation of your assets. The key issue here is whether you are confident enough in your business to believe that it will take off eventually and start generating profit again – or if it is destined for oblivion. In some cases, liquidating your business and personal bankruptcy may be more advantageous rather than trying to salvage an unsalvageable situation.
Of course, even if you think that you are in financial dire straits, bankruptcy doesn’t destroy your chances of recovery and doom your business. The right time for filing depends on a variety of other factors. Principal among these is the question of money withdrawals – whether you’ve paid yourself a bonus in the past 12 months, repaid a creditor who could be considered an insider (such as your family member or friend), transferred ownership of business equipment or a plethora of other issues. The reason is that in case of bankruptcy, particularly Chapter 7, these actions can be challenged and lead to problems down the line – including accusations of fraud.
The precise moment for filing is difficult to identify. In general, to consider all of the possible factors, you need to consult with a qualified legal professional, particularly if you can be considered as having committed fraud. An ounce of prevention is worth a pound of cure. At Van Horn Law Group, we are here to help. Get your free initial consultation.
A new year often brings a renewed sense of motivation—and for many people, that motivation…
Choosing a bankruptcy attorney in Florida is a big decision, and most people don’t make…
Losing a car to repossession is a personal financial crisis that impacts our ability to…
The holidays are a time for joy, generosity, and reflection — but for many people,…
January takes its name from Janus, the Roman god of new beginnings. It’s a fitting…
If you’re a single woman, that is a woman who has never married, divorced, or…