BANKRUPTCY is a bad word every business owner is working hard to avoid.
And, yet, it’s also a tool given to entrepreneurs as an encouragement to take risks and be able to have a fresh start when things don’t work out.
The last few years have been tough for a lot of small business owners. They have seen profits dwindle down and yet their overhead hasn’t changed. If bankruptcy is a thought that may have crossed your mind on either a personal or business level, don’t despair. You are not alone.
The recession has had a domino effect on small business owners like you. With no access to traditional financing like large businesses often do, a lot of small business owners have increased credit card usage to fund their operations. This is where the dividing line between business and personal liabilities begin to blur at times- when people start using their personal credit for their business. And of course, when the business fails, they may be held personally accountable for the debts that the business has incurred.
Who is liable for the debts- you, your business, or both? The answer depends on how you’ve structured your business and who guaranteed the obligations of the business. Unfortunately, for a lot of business owners, the personal guarantee is unavoidable if they’re trying to borrow money for their business.
There are alternatives to bankruptcy for business owners who can restructure their debts, work with creditors and reduce their expenses to stop the bleeding. But sometimes, bankruptcy is unavoidable. The good news is that it is not often as bad as most people think. In this article, I only address how an individual may PERSONALLY address business debts for which he or she may be held personally responsible.
A Chapter 7 may be the way for an individual to relieve himself or herself of debt. Most Chapter 7’s are no asset cases so in a majority of cases, creditors receive nothing. A Chapter 13 is an option if there is disposable income available, and creditors may be paid according to best efforts, usually greatly reducing the total debt amount. Payments are made to a Chapter 13 trustee for 3-5 years and all types of debts including taxes, medical bills, student loans, etc. can be consolidated into one affordable monthly payment.
You should understand that bankruptcy may be a complicated process if you have a business because there are often a lot of issues involved and you have a big stake in the outcome. So this is definitely an area that you would not want to navigate on your own. Instead, consult with an experienced bankruptcy attorney as soon as possible.
If you have found that you are getting close to a time when your debts are becoming unmanageable, contact my office before you stop paying your debts. There may be steps that can be taken short of bankruptcy that can get your business back on track. Call my office at 866-477-7772 to schedule a free attorney consultation. We have offices in Pasadena, Valencia and Cerritos.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped thousands of clients in getting out of debt. For a free attorney evaluation of your situation, please call Ray Bulaon Law Offices at TOLL FREE 1 (866) 477-7772.