Overwhelming debt can impact businesses of any size. For small companies and sole proprietorships, filing for bankruptcy might be the optimal solution for seeking relief from creditors. Whether your objective is to wind down operations or continue your business, choosing the appropriate bankruptcy chapter to file under is crucial.
Our experienced small business bankruptcy lawyers at Law Offices of Terrence Fantauzzi can guide you through this complex process, explaining your bankruptcy options and ensuring your company gets the protection it requires.
Understanding Small Business Bankruptcy Options
For small business owners, two primary types of bankruptcy petitions are available—Chapter 7 and Chapter 13. Although both programs enable the court to pause collection efforts and discharge most forms of debt, they employ different approaches.
Chapter 7 Bankruptcy for Businesses
All businesses, regardless of size, can seek protection under Chapter 7 bankruptcy. In this scenario, the court appoints a trustee who may seize and liquidate some company assets to settle creditor debts. Sole proprietors may declare certain assets as exempt. This form of bankruptcy often leads to the cessation of the company’s operations.
Chapter 13 Bankruptcy for Sole Proprietors
Sole proprietorships are eligible to file for Chapter 13 bankruptcy protection. This debt relief option involves the court ordering the business owner to make payments over a specific period, funded by the company’s profits.
Chapter 13 bankruptcy can safeguard both the businesses and the personal assets of small business owners. Our experienced lawyers can assist business owners in determining which bankruptcy form best aligns with their needs.
Initiating the Bankruptcy Process
Upon receiving a bankruptcy protection petition, a bankruptcy court will issue an automatic stay. This order notifies all creditors that they are barred from initiating new debt collection actions, and all current collection efforts must cease. The automatic stay also halts ongoing lawsuits demanding payments.
For business owners to take advantage of this protection, they must submit complete and accurate petitions. As per 11 United States Code § 521, parties seeking bankruptcy protection must submit detailed financial data to the court. For small businesses, this includes:
- Profit and loss statements
- A list of company assets
- A list of creditors and amounts owed to each party
- Any current lease agreements for property or equipment
- Personal financial data if the applicant is seeking protection as a sole proprietor
Our dedicated attorneys can support small businesses in collecting and submitting this crucial information to the bankruptcy courts.
Secure Your Business’s Future with a Small Business Bankruptcy Attorney
Many businesses grapple with escalating debt. When this debt threatens your small business’s future, it might be time to consider bankruptcy protection. Besides potentially discharging much of your company’s debt, this legal process can immediately halt collection efforts.
Our small business bankruptcy lawyers are prepared to assist you throughout this process. Contact Law Offices of Terrence Fantauzzi today at (909) 552-1238 to learn how we can safeguard your business’s finances.