Series of unfortunate events causes Minnesota business to file bankruptcy

The owner of a Minnesota tannery has filed personal bankruptcy after a series of unfortunate events left him struggling financially. The tannery took in hides from large game animals and transformed them into custom clothing and accessories.

A few months ago, the local business owner filed personal bankruptcy stating that he "ran out of money." The business was damaged by flooding in 2010 and the insurance did not cover all of the damage. Then, a relative, who was put in charge of running the business while the owner took on a new job, was in an accident and became paralyzed. These events caused them to get behind financially and they just "couldn't keep up."

The business owner wished he took action earlier.

Warning signs of a business in trouble

No Minnesota business owner plans to file for bankruptcy. Like the Minnesota tannery business owner, oftentimes people are forced to file for bankruptcy because of unexpected and unwanted circumstances.

Signs of an impending bankruptcy include:

  • Limited or no cash flow
  • Inability to pay creditors
  • Increased borrowing on credit cards or other business loans
  • Using personal credit cards, your house or retirement accounts to fund your business

Bankruptcy, however, is not a death sentence for your business. It can actually keep your business in operation. If you are contemplating business bankruptcy, you need to do it right and on your own terms.

Bankruptcy options for small business owners

There are three types of bankruptcy that may be available for a struggling small business. An experienced bankruptcy attorney can explain these options in more detail and determine what type of bankruptcy, if any, is right for your company. The three types of bankruptcy include:

  • Chapter 7 Bankruptcy. Chapter 7 is a liquidation bankruptcy. Generally, Chapter 7 is used as a personal bankruptcy, rather than a business bankruptcy because it is possible for personal assets to be exempted, but can be used in a sole proprietorship situation. A Chapter 7 bankruptcy may close the doors on your business.
  • Chapter 11 Bankruptcy. Chapter 11 is often used by businesses. The goal of a Chapter 11 is to reorganize the debts so the company can continue operations. This is only used by very large businesses.
  • Chapter 13 Bankruptcy. Chapter 13 is also a debt-restructuring plan. Chapter 13 is a personal bankruptcy plan. However, individuals operating unincorporated income generating businesses may also file Chapter 13. If the individuals own a business corporation that pays them on a regular basis then they can file a Chapter 13 as an individual. The corporation itself may not file a Chapter 13.

Choosing the bankruptcy option best for your small business

Business owners have different goals and needs. Some business owners may want to close the business, others may want to keep the business going. If your business is struggling financially, an experienced bankruptcy attorney will guide you through the bankruptcy options and find a plan that is best for you. Contact a bankruptcy lawyer in your area today.