Many Tennessean’s dream of starting their own businesses, and if you have something good going for you, hopefully, it stays that way. Occasionally, however, something can happen to put you into debt. A medical emergency in the family that needs to be paid for, a sudden economic recession or even a flip in the market of whatever products or services you provide are all things that could lead to unforeseen debt.
If you are facing debt that cannot be paid, it may be prudent to declare bankruptcy. Declaring bankruptcy as a small business or corporation has some key differences compared to filing as an individual.
Chapter 7
Forbes points out a unique problem for businesses when declaring Chapter 7 bankruptcy. The assets of your business will be liquidated and paid to creditors when filing for a Chapter 7. Individuals, on the other hand, can typically get all of their debts discharged, and may have some assets that are exempt from liquidation.
Chapter 13
If you are still getting income from your business, but it is just not enough to cover your debts, Chapter 13 bankruptcy may work. It allows you to maintain your assets as long as you commit to repay creditors with some of your future earnings.
Chapter 11
Chapter 11 bankruptcy deals specifically with businesses, but it can take a long time to set up. This type of bankruptcy allows you to design a reorganization plan that allows you to repay creditors while continuing to own your assets as you reorganize your business.
This is not meant to be legal advice as to which type of bankruptcy you should choose, but rather is meant to inform you of the pros and cons of the different options.