The Effects Of Business Bankruptcy
Businesses can struggle financially just like individuals. However, unlike individuals you may have employees who depend on you for their livelihood so you can’t afford to close the doors. Your financial difficulties may be temporary, like a downtown in the industry, and you know you will be able to pull yourself out of it eventually. There is hope in the form of bankruptcy but you may be concerned about what the effects of business bankruptcy will be.
Elimination of Debt
The main reason for businesses to file bankruptcy is to eliminate debt. However, how much debt is eliminated may depend on your business arrangement and which type of bankruptcy you must file. If you own the business yourself or with a partner, Chapter 7 will cancel all business debts, leases judgements and other unsecured debt. Although corporations may file under Chapter 7, debt is not eliminated. Under Chapter 11 and 13, debts are reorganized and at least some of them are repaid to the creditor.
Keeping the Business Open
If you file under Chapter 11, you must reorganize the business in order to keep it operational and repay at least some of the debt over time. Under Chapter 13, you may also keep the business open, but you must repay at least some of the debt in between three and five years. If you file Chapter 7, you will have to close the assets and sell any property that the business owns, but you will not have to pay any unsecured debts.
Effects of Business Bankruptcy on Credit
If your business is incorporated, filing bankruptcy on the business will not affect your credit unless you took out credit in your name for the business. If you signed a credit card agreement in your name, but only used it for the business, you are still responsible for that debt even if the business files Chapter 7. Even if all the debts were in the corporation name, vendors who were not fully repaid under your bankruptcy may not be willing to extend credit in the future. Even if your business bankruptcy affects you personally, it will only remain on your credit report for ten years unless you file Chapter 11 which only shows for seven years.
If your business is facing financial difficulty, you need to contact a bankruptcy lawyer to see what options you have. Contact Georgette Miller and Associates today to see how they can help. You can arrange for a no obligation consultation by completing the form or calling us today.