Founder
Filing for bankruptcy can be a tough decision, especially if you own a business. Many business owners fear they’ll have to shut down completely, but that’s not always the case. Whether you can keep your business depends on factors like the type of bankruptcy you file and how your business is structured. Let’s break it down so you can understand your options.
1. How Your Business Structure Affects Bankruptcy
Your business setup plays a big role in how bankruptcy impacts you.
- Sole Proprietors: Your business isn’t separate from you, so its debts and assets are included in your personal bankruptcy case.
- LLCs and Corporations: These are legally separate entities, which may offer more protection for personal assets but could also mean a different bankruptcy process.
2. Understanding Chapter 7, Chapter 13, and Chapter 11
The type of bankruptcy you file determines whether your business can continue operating.
- Chapter 7 (Liquidation): Assets may be sold to pay off debts. Sole proprietors might be able to keep their business if their assets are exempt, but LLCs and corporations often have to close.
- Chapter 13 (Reorganization for Individuals): This allows sole proprietors to keep their business while repaying debts over time.
- Chapter 11 (Reorganization for Businesses): Designed for businesses looking to restructure debt and keep operating. Small businesses can benefit from a streamlined version called Subchapter V.
3. Can You Protect Your Business Assets?
Yes, but it depends on your situation.
- Exemptions: Certain tools, equipment, or assets may be protected under Kentucky bankruptcy laws.
- Reorganization Plans: In Chapter 13 or Chapter 11, you may continue running your business while following a structured repayment plan.
4. What Happens to Your Business Debt?
- Personal Liability: If you personally guaranteed business debts, you might still be responsible for them.
- Debt Discharge: In some cases, bankruptcy can eliminate certain debts, helping you start fresh.
- Negotiation with Creditors: Sometimes, creditors may be willing to settle for less or restructure payments to keep your business running.
5. Choosing the Best Path for Your Business
Bankruptcy doesn’t always mean losing everything. A knowledgeable attorney can help you explore options to protect your business, restructure debt, or find alternatives to filing.
If you’re considering bankruptcy and worried about your business, Dennery Law can guide you through the process.
