Pensacola FL. Business Bankruptcies
Although Florida is notable for its fast growing economy, various businesses operating within the state, just like everywhere else, will face the challenge of excessive debt. In some cases, filing for bankruptcy will be the only option left open to them. This allows them to stay afloat or close shop amicably.
Generally, there is chapter 7 bankruptcy, then chapter 11 and 13 bankruptcies.
Choosing the right bankruptcy option for your business
The different bankruptcy chapters affect businesses differently, depending on the type of business. You must carefully consider the type of bankruptcy filing that is most suitable for your business.
- In sole proprietorships, the business and the owner are the same entity. The personal assets and business assets would both be sold off in the event of liquidation of the business. Therefore, when filing for bankruptcy as a sole proprietor, it must include personal as well as business assets and debts.
- Chapter 7 bankruptcy is more beneficial to the sole proprietor. In the event of bankruptcy, every qualifying personal and business debt will be wiped out. There are restricted exemptions. Ask us for details. The business owner will no longer need to continue paying the debts. It results in the closure of the business while the assets are sold off.
- A sole proprietor business can consider filing for Chapter 11 bankruptcy if your debts are higher than the amount permissible under Chapter 13. With the options of Chapter 13 and 11, as the case may be, the business may continue functioning despite the bankruptcy. You must be able to generate enough income to make the monthly payments which will be lower than the pre-bankruptcy payments. You can keep your property as well as your business with this option.
- Chapter 13 filing is only for individuals and sole proprietorships.
- Partnerships and Corporations also often find themselves in a financial quagmire that has them resorting to bankruptcy. Debts cannot be written off, nor can your business property be shielded. However, there are certain benefits your business is entitled to in the course of bankruptcy.
- In filing Chapter 7 bankruptcy, your business will be closed by the bankruptcy trustee handling the process. The shareholders are protected from individual liability through the process. Though in some cases, the creditors may still ask the court to compel the shareholders to pay a portion of the debt.
- You can also file for Chapter 11 bankruptcy. This is suitable for partnerships and corporations as it affords the owners the right to keep their businesses. They can operate the businesses while paying the debt off. The downside is that for small corporations, the higher cost of legal fees and the extra rights given to the creditors increases the cost.