Overwhelming debt can affect companies of any size. Whether you employ a few people or work alone, filing for bankruptcy may be the best way for you to seek relief from creditors. Depending on the chapter you file under, bankruptcy could help you wind down operations or continue doing business.
A Rancho Cucamonga small business bankruptcy lawyer may be able to help your company. Our skilled legal team could explain your bankruptcy options and take every necessary step to bring your company the protection that it needs.
Forms of Bankruptcy Available to Small Businesses
There are two main types of bankruptcy petitions available to small business owners—Chapter 7 and Chapter 13. Both programs allow the court to place a hold on collection efforts and discharge most forms of debt. However, they each take different approaches.
Chapter 7 Bankruptcy
All companies can seek protection under Chapter 7 bankruptcy. During this process, the court will appoint a trustee to the case who may seize and liquidate some of the company’s assets to pay creditors. Sole proprietors may declare certain assets as exempt. This form of bankruptcy often results in the winding down of the company.
Chapter 13 Bankruptcy
Sole proprietorships are also permitted to file for Chapter 13 protection. In this form of debt relief, the court will order the business owner to make payments over a set period of time. These installments will come from the profits of the company.
This process can help small business owners protect both their companies and their personal assets. A lawyer who has experience working with small businesses could help owners determine which form of bankruptcy is best for them.
Initiating Bankruptcy Proceedings
Once a bankruptcy court receives a petition for bankruptcy protection, that court will issue an automatic stay. This order serves as notice to all creditors that they cannot initiate any new acts in an attempt to collect on debts. Additionally, all current collection efforts must stop. The automatic stay even halts current lawsuits demanding payment.
However, business owners must submit complete and accurate petitions to benefit from this protection. According to 11 United States Code § 521, all parties seeking bankruptcy protection must submit detailed financial data to the court. As applied to small businesses, this includes:
- Profit and loss statements
- A list of company assets
- A list of creditors and the 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
A hard-working attorney could help small businesses gather and submit this information to the bankruptcy courts.
A Small Business Bankruptcy Attorney is Ready to Step In
Many businesses struggle with mounting debt. When this debt makes it difficult to see a future for your small business, it may be time to pursue bankruptcy protection. Not only can this result in a discharge of much of your company’s debt, but it can also put an immediate halt to collection efforts.
A small business bankruptcy lawyer may be able to help you with this process. Give us a call today to learn more about protecting your business’s finances.