Using Chapter 7 Bankruptcy for Small Business

: Reese Baker & Associates

  Filed under: Chapter 7

business bankruptcyChapter 7 is often considered the bankruptcy action for personal bankruptcy. It is also applicable for small businesses that are either a sole proprietor or general partnership. In these forms of business you as the owner are personally responsible for the business debts, and that is why the chapter 7 bankruptcy is applicable.

If it so happened that your business was incorporated or a LLC then you would need to file for the chapter 7 bankruptcy on behalf of the company. In any case you should make sure that you have an experienced attorney who knows about handling business bankruptcy.

It is not uncommon for a small sole proprietor business owner to end up in serious financial problems because of the investments they are making into their business. The first thing that has to be determined is whether and what business debts are you personally liable for. According to the law a sole proprietorship business is not a single entity from you as the owner. A incorporated or LLC business is considered a separate entity. As such these forms of business in regards to liability are dealt with differently in a bankruptcy filing.

Although some businesses and personal individuals can both file for chapter 7 bankruptcy they are handled differently. In a personal Houston bankruptcy many debts can be discharged so they don’t have to paid, and there are exemptions for property. In a business bankruptcy there are no exemptions and all of the business assets have to be sold in order to pay the creditors.