When your small business is no longer able to survive, you may consider filing for bankruptcy. One kind of business bankruptcy, Chapter 7, is a liquidation of assets to repay debts and is usually the end of the business. Chapter 11 is designed to be a means for financial reorganization, meaning the owner is on the way to at least finding solutions to the problems that led to the bankruptcy.
When a small business owner files a Chapter 11 bankruptcy, the court appoints an agent or conservator to oversee the business assets and restructure them to best pay off debts while still keeping the business afloat. Filing for Chapter 11 stops creditors from the collection process and allows the court-appointed conservator to reorganize how the company's finances will be structured. A Chapter 7 bankruptcy means that the company's assets are liquidated to repay creditors. An agent will sell the assets and pay the proceeds to creditors, secured creditors first and then unsecured creditors.
The best move a small business owner can make is to hire a bankruptcy attorney with experience in small business cases. An attorney can get to work early in the process to prepare your case for the court. Find out how long the attorney has been practicing and how many bankruptcies he's done, and with what results.
A bankruptcy attorney can help you navigate the uncertain waters of bankruptcy court and work in your best interest to try to minimize as much as possible the negative effects of small business bankruptcy. Even if you feel you don't have enough cash on hand to hire an attorney, an attorney's expertise may pay off in the long run.
Besides hiring an attorney, you need to prepare your business for the possibility of bankruptcy. First, cut your company's expenses, from overhead to payroll. Keep up with payroll taxes, because you can be personally liable for any employee taxes and face severe penalties on unpaid taxes. Never try to hide your assets in an attempt to keep them out of the way; you could be charged with fraud. Keep accurate financial records so that the bankruptcy attorney and the court can deliver a fair assessment of your company's situation.
Bankruptcy has become inevitable for many Americans, and the reason for their debt is often a burdensome mortgage payment. In some cases, people who go bankrupt can hang on to their homes, depending on the type of bankruptcy they file.
Filing bankruptcy without an attorney may be an option if can't afford legal help. You'll be happy to know that you can legally file bankruptcy without an attorney. It takes a lot of effort and knowledge to do so, but it can be successfully done.