Saturday, August 21, 2010

Small Business Owners :: Which Bankruptcy Chapter is for You?

With the unreal economic downturn the US has experienced since the major subprime crisis of 2007, it's really no surprise at all that small business like sole proprietors and partnerships have suffered tremendously. But what these mom and pop shops don't understand in the face of financial crisis is which chapter of bankruptcy is appropriate for their unique circumstances.

While it is true that proper business planning ahead of time can help small business owners from losing personal assets, most sole proprietors and other types of "micro-businesses" will still have to worry about personal assets becoming a part of a chapter 11 filing. So... would it make more sense to file chapter 7 or 13? Maybe so.

In many cases, a small business owner may be in such financial distress that they would have to file for both personal and business bankruptcies. For those who are sole proprietors, a personal bankruptcy can resolve both issues in many cases -- and in most of these cases, it can resolve the issues more quickly and more cheaply.

There are of course many variables: assets, estate plans, wills, inventory, insurance, and so on. This makes each small business bankruptcy turned personal bankruptcy different, and in some circumstances, moms and pops may have to file chapter 11 and chapter 13 or chapter 7.

The only way to know for sure is to get a consultation with a local bankruptcy attorney who can look at all of your financials and lead you down the right path. After all, making an educated decision armed with the knowledge of a lawyer could save your business or your personal assets. So don't go it alone; make sure you have proper representation that can make the most of your bankruptcy filing.

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