Many small business owners in Ohio open their new ventures with high expectations of success. Unfortunately, unforeseen circumstances sometimes lead to financial difficulties that are insurmountable. While small business bankruptcy is an option, deciding which bankruptcy chapter would be the most appropriate filing can be challenging.
The first option to consider is liquidation through Chapter 7 bankruptcy. After the sale of business assets at an auction to raise funds for creditors, remaining unsecured debts will be discharged. In most cases, it will lead to the closing of the business. However, if the requirements for filing Chapter 7 bankruptcy are not met, other options must be explored.
Chapter 11 allows a business owner to prevent closing by proposing a reorganization plan for dealing with existing debts. The business owner must show the bankruptcy court the ability to reestablish profitability after bankruptcy. It may be worth noting that this is often an expensive option for an already cash-strapped business. The last option is Chapter 13 that is only available to business owners who are sole proprietors and will file in their personal capacities and not that of the company. This will allow the owner to repay the business debt over an extended period according to a court-approved repayment plan.
These are the basic options available for small business bankruptcy. A consultation with an experienced Ohio bankruptcy attorney can provide details about the requirements to qualify for each option. After assessing the financial situation of a small business, a lawyer can explain the available options along with the pros and cons of each. Depending on whether the client wishes to keep the business going or close the doors, the most suitable plan of action can be put into action with the support and guidance of a seasoned attorney.
Source: FindLaw, “Business Bankruptcy: Which Type Is Best for You?“, Brett Snider, Accessed on Nov. 18, 2016