Bankruptcy can give a struggling business owner the option to stay open or to close the business, and the relief provided depends on the nature of the business and the bankruptcy type. Under chapter 11 and chapter 13, businesses can stay open and pay creditors monthly. Not all bankruptcy types are good for all businesses, and choosing the wrong type can adversely affect a business owner’s finances and leave them open to litigation. In this guide, readers can learn how to get help from business bankruptcy lawyers in St. Louis.
Sole Proprietorship and Chapter 7
The most important benefit of chapter 7 for sole proprietors is that qualifying personal and business debts are wiped out without the need for monthly payments. However, all assets, both personal and from the business, are included in the bankruptcy estate. The law allows the business owner to retain some assets, and those that aren’t exempt are sold and the money distributed to creditors.
Chapters 11 and 13 for Sole Proprietors
One big reason to consider chapter 11 or chapter 13 is that doing so allows a business to remain open. However, the company must have the cash flow to make monthly creditor payments. It’s a good choice when the owner wants to stay open but doesn’t qualify for chapter 7 because they have too much money or too many assets.
Choices for Corporations and Partnerships
Bankruptcy is common among corporations and partnerships, who aren’t entitled to debt discharge and asset exemption as sole proprietors are.
* It’s typically easier to wind down a waning business with chapter 7 because there’s no need to sell inventory, liquidate fixtures and equipment, or collect accounts receivable.
* It won’t get rid of a partner’s personal responsibility for the business’ bills. While the company’s structure protects the shareholders from liability, they should be aware of the risks of bankruptcy.
Although chapter 13 is available only to sole and individual proprietors, corporations and partnerships can get many of the same benefits by filing for chapter 11. For more information or to consult business bankruptcy lawyers in St. Louis, visit the firm’s site at Stlbankruptcyfirm.com today.
Follow us on Twitter for latest updates.
