Filing a chapter 7 bankruptcy for small business

If you are considering bankruptcy, it is important that you select the right type of plan. Different types of bankruptcy filings produce very different outcomes. For small businesses, Chapter 7 bankruptcy can sometimes be beneficial.

Depending on your particular situation and needs, this type of plan may be right for you. Take some time to learn about Chapter 7 bankruptcy and how it may benefit a small business.


The United States Bankruptcy Court provides the requirements for filing a Chapter 7 bankruptcy. Both individuals and businesses may file. In fact, personal and businesses are two separate designations under the Chapter 7 umbrella.

However, for those individuals doing business as sole proprietorships, the individuals and businesses count as joint entities. In these instances, the individual must file for personal bankruptcy, which counts for the individual and the business. For those with LLCs, the personal and business bankruptcies are separate. Considering that fact, in the case that a business owner only files a business bankruptcy, that individual must still deal with any personal obligations in association with the business, unless he or she files a personal bankruptcy as well.


In short, a Chapter 7 bankruptcy provides individuals with a fresh start. It wipes out all debt within three to four months, so individuals may begin new endeavors quickly. This type of bankruptcy dissolves the business, so it removes all business obligations. For those who file personal bankruptcy as well, this dissolves all connections to the business. This frees the individual to pursue new opportunities.

A Chapter 7 bankruptcy can be helpful for certain types of business owners. If you find yourself struggling with a sinking business, consider this option. Take some time to review the stipulations and process, and speak with a knowledgeable professional if possible. That way you may make the best decision for you and your future goals.

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