Filing for bankruptcy is a major decision. It is a decision that you can benefit from if your small business is struggling and you are dealing with a considerable amount of debt. Running a small business is a challenge, but it is not impossible for you to do. However, getting started with a business is what will often cost the most money. You may have maxed out business credit cards and taken out different types of loans to afford various business-related expenses when you were first getting started. If you have not been making enough money to pay back everything that you owe to your creditors, you have likely fallen behind.
You should not feel ashamed about falling behind on payments because it can happen to anyone. You are likely feeling concerned about the future of your business and your finances now that several creditors are trying to get in touch with you while requesting that you pay what you owe them. The constant phone calls are enough to drive anyone crazy, and you might not know how to move forward from this situation. If your financial situation is only getting worse and you are continuing to fall behind on payments to creditors, you may wonder if filing for bankruptcy is the right thing for you to do.
Understanding the bankruptcy process and the impact it can have on your small business is important. You should know this information before making such a major decision.
Continue to Keep Your Business Running
There is a common misconception that if a small business owner files for bankruptcy, he or she will need to shut the business down for good. Although this can happen at times, there are ways to avoid it. If you are interested in continuing to run your business because you have faith in it and you believe it is going to take off to the point that you are making a healthy profit on a regular basis, you may be able to save your business while still filing for bankruptcy.
The best way to continue running your business while overcoming your trouble with debt is to file Chapter 13 bankruptcy. When you file in this type of manner, you are making an agreement with your creditors to pay what you owe them, but you would not be expected to pay the money back in a lump sum. Rather than paying it all at once, the debt between all the creditors is typically consolidated into one payment that you would make on a monthly basis. Upon making that monthly payment, the money is then disbursed to each of those different creditors. With a bankruptcy lawyer, you may even be able to negotiate payment terms and the amount that you owe, which means possibly paying a lot less than what you actually owe your creditors.
Save Money While Paying Less Back to Creditors
If you are looking to save money while still paying money back to your creditors, filing for bankruptcy is often a great choice. There are two primary scenarios that you can consider when trying to handle your debt.
When filing Chapter 13 bankruptcy, you can save your business if you are making enough to afford the cost of maintaining the business while also paying off your creditors. Before you begin making any payment arrangements with creditors, your bankruptcy lawyer will likely work on negotiations to possibly get some of your debt reduced. If you can end up paying much less back than what you originally spent, you can save more of your money while continuing to run your business and getting back on track. The new monthly payment may be much more manageable for you.
While Chapter 13 is an option, you also have the option of filing Chapter 7. If your business venture did not turn out too well and you are willing to close the business, you can file in this way and potentially avoid paying your own money back to the creditors. The Chapter 7 filing process is much different than the Chapter 13 filing process. It is only something you should do if you are willing to part with the business. Not everyone is willing to do that, especially if they believe in their business and its ability to have more success in the coming months.
Decide to Close the Business if You Want
Closing the business may be something that you have decided to do after careful consideration. If it is not working out for you and you are having a tough time staying afloat, you might feel like the best thing to do is to shut the business down. If you are willing to close the business, you can talk to your bankruptcy lawyer about filing for Chapter 7 bankruptcy.
During this process, you can have your debt eliminated without ever worrying about making monthly payments back to your creditors. However, you would need to sell some assets that are not considered exempt. The exempt assets would normally include assets that you need, such as your home and your personal vehicle. Additional assets that are not exempt are sold off and the money from the sale is disbursed to the creditors to help pay back some of the money that you owed to them. Even if they do not get the full amount of money that is owed to them, you will not need to pay anything out of your own pocket, which means you can avoid feeling like you are going broke while trying to please your creditors.
Eliminate Debt-Related Stress
Filing for bankruptcy can help you eliminate the debt-related stress that you have. If you are constantly worrying about owing money to creditors and dealing with their harassing phone calls, it is going to take away from your ability to focus on the business. If you truly want to have the most success possible with your business, you need to be focused on marketing, inventory, and other business-related tasks rather than distracted by the debt you owe. Bankruptcy is something that could potentially save your business by giving you more peace of mind and making you feel more at ease about your situation. As a result, your business may begin to flourish and do much better than it has done over the past several months.
How to Get the Bankruptcy Process Started
Now that you know how bankruptcy can affect your small business, it is up to you to decide if it is the right decision to make. It is entirely possible to continue running your business while filing for bankruptcy because of all the debt you owe, but you would simply need to choose Chapter 13 bankruptcy over Chapter 7. If you would like to get the bankruptcy process started, the first thing you need to do is contact a bankruptcy lawyer. You can explain your financial situation and provide details on the debt you owe to the lawyer before getting started.
It is necessary to gather all financial information, including details on business-related expenses, business income, and debt from different creditors. You can show your lawyer this information before you start the filing process. Your lawyer will ask you different questions and help you decide which way to file before getting started. Once you do start the filing process, you can expect the creditors to stop calling you and trying to reach you to discuss the debt.
If you are the owner of a small business and you are currently dealing with a lot of debt, you are probably thinking about filing for bankruptcy. When you are ready to get out of debt and work on improving your finances, reach out to us today. At Bouloukos, Oglesby, & Mitchell, we have experience with bankruptcy law. We can work with you to get you through this situation in no time.