Starting a small business can be risky. You have a fifty-fifty chance of surviving over a five year period. If you are one of the unlucky ones who is facing a mountain of debt without much hope of recouping your losses, you have some decisions to make. You might be able to sell off the real estate and then sell the personal property piecemeal. You could also consider a business bankruptcy TN owners have used to their advantage in the past. Your next decision is choosing either Chapter 7 or 13.
Chapter 7 is an option for both businesses and individuals. Sole proprietors must file personally because the Internal Revenue Service doesn't distinguish between the two. Many owners opt to file personally and as a company. That way any company debts they are personally responsible for are wiped out.
Chapter 7 benefits sole proprietors because they can rid themselves of personal and company debt with one filing. Exempting assets is possible. When you want to continue to operate your business, you can do so without the previous debt. Bankruptcies are an easy way out of a failing company for corporations. After a Chapter 7 filing, a trustee is put in charge of liquidating assets and paying creditors.
There are disadvantages to Chapter 7 filing for corporations. Their debts won't be discharged as a result of this action, and the company will be shut down. A company filing doesn't allow for exemption of assets. It won't wipe out personal debt. It is a good option for those who want out of a company, who have few company assets and aren't personally liable for company debts.
LLCs, partnerships, and corporations don't have the choice of filing Chapter 13 at all. It is reserved for sole proprietorships and individuals. It is possible for a sole proprietor to file personally and eliminate company and personal debts at one time.
If you haven't given up on the business and want a fresh start, Chapter 13 could be a good option. You can retain your assets and keep the company running while you set up a repayment plan. If you had filed Chapter 7, and had more assets than allowable exemptions, the trustee would have sold some of your assets. Filing Chapter 13 eliminates that problem. You can use Chapter 13 to wipe out company debts you are personally responsible for, even if the company is operating as a corporation.
The biggest drawback for businesses is that Chapter 13 is reserved for individuals. Chapter 13 isn't a quick process for those with repayment plans. Those can take up to five years to complete. If you have assets you can't exempt, you are required to pay unsecured creditors an amount equivalent to their face value. Even though you eliminate personal debt with Chapter 13, the company debt will still exist.
Bankruptcies aren't pleasant prospects. They should be a last resort. Before you take such a drastic step, you need to weigh all your other options. Only after you have exhausted those should you consider Chapter 7 or 13, and then you need to consider how it will affect your reputation and your future.
Chapter 7 is an option for both businesses and individuals. Sole proprietors must file personally because the Internal Revenue Service doesn't distinguish between the two. Many owners opt to file personally and as a company. That way any company debts they are personally responsible for are wiped out.
Chapter 7 benefits sole proprietors because they can rid themselves of personal and company debt with one filing. Exempting assets is possible. When you want to continue to operate your business, you can do so without the previous debt. Bankruptcies are an easy way out of a failing company for corporations. After a Chapter 7 filing, a trustee is put in charge of liquidating assets and paying creditors.
There are disadvantages to Chapter 7 filing for corporations. Their debts won't be discharged as a result of this action, and the company will be shut down. A company filing doesn't allow for exemption of assets. It won't wipe out personal debt. It is a good option for those who want out of a company, who have few company assets and aren't personally liable for company debts.
LLCs, partnerships, and corporations don't have the choice of filing Chapter 13 at all. It is reserved for sole proprietorships and individuals. It is possible for a sole proprietor to file personally and eliminate company and personal debts at one time.
If you haven't given up on the business and want a fresh start, Chapter 13 could be a good option. You can retain your assets and keep the company running while you set up a repayment plan. If you had filed Chapter 7, and had more assets than allowable exemptions, the trustee would have sold some of your assets. Filing Chapter 13 eliminates that problem. You can use Chapter 13 to wipe out company debts you are personally responsible for, even if the company is operating as a corporation.
The biggest drawback for businesses is that Chapter 13 is reserved for individuals. Chapter 13 isn't a quick process for those with repayment plans. Those can take up to five years to complete. If you have assets you can't exempt, you are required to pay unsecured creditors an amount equivalent to their face value. Even though you eliminate personal debt with Chapter 13, the company debt will still exist.
Bankruptcies aren't pleasant prospects. They should be a last resort. Before you take such a drastic step, you need to weigh all your other options. Only after you have exhausted those should you consider Chapter 7 or 13, and then you need to consider how it will affect your reputation and your future.
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