Business owners can find themselves in tough financial situations and wondering where to turn for help. If you are the sole proprietor of a business who is struggling with debt, it is common to have questions. Can I file for bankruptcy? Will the creditors finally leave me alone? Can the business survive?
At Prescott & Pearson, P.A., we help small businesses with debt. While we represent small-business corporations and LLCs, we also handle Chapter 7 bankruptcy for owners with a sole proprietorship.
Filing for personal bankruptcy puts end to creditors
With a sole proprietorship, the owner is the business. This allows them the opportunity to manage business debt through a Chapter 7 personal bankruptcy. With this debt relief tool, it is important to note that the business itself can continue to exist. While certainly challenging, a bankruptcy filing by a sole proprietor does not need to be the end of the business.
For business owners who are struggling financially, many enjoy the benefits of bankruptcy; including the fact that filing for bankruptcy puts an automatic stay in place. This means that creditors will stop the harassment of trying to collect the debt. Rather, the appointed trustee will look at non-exempt property and collateral to determine what can be sold to pay creditors. What cannot be paid is typically discharged, which means the sole proprietor is no longer on the hook for the debt.
Helping small businesses bounce back from bankruptcy
There are plenty of myths and misconceptions when it comes to filing for bankruptcy. At the top of this list for many business owners is that a Chapter 7 will be the end of their business.
If the goal is to keep the business open, do know that there may be challenges. In some cases, after careful consideration, it may actually make the most financial sense to liquidate and let the business close. However, in others, it may be possible to actually start over. No matter what the goal is, a sole proprietor will want to talk over the current financial situation and goals with an attorney before moving forward.