Common Bankruptcy Concerns for Businesses
Any business owner who has concerns about the financial viability of the business, or worries about repaying debts in the shorter term until business picks up, may be looking into business bankruptcy options. Our West Palm Beach bankruptcy attorneys know that you are likely to have a wide range of questions, and that you will also have some concerns that you will want to discuss with a lawyer well in advance of moving forward with a business bankruptcy case. Given that we routinely work with businesses on Chapter 7 and Chapter 11 bankruptcies, including small business and Subchapter V bankruptcies, we know that certain concerns are often shared among business owners, and we can provide you with some answers and information. The following are common bankruptcy concerns for businesses, along with information from our firm.
Fears About Creditors Seeking Payments from Business Owners Personally
In general, businesses are entities that are distinct from the owners. Accordingly, when a business files for bankruptcy — whether it is Chapter 7, Chapter 11, or another type of bankruptcy — the business owners will not be liable for business debts. The two primary exceptions are situations in which a business owner has made a personal guarantee for a business loan, or in circumstances where the business owner is a sole proprietor. In the latter, the business and the owner are, for all intents and purposes, the same legal entity, but even in these cases, a personal bankruptcy can allow the sole proprietor to reorganize business debt along with personal debt, while a Chapter 7 bankruptcy can allow the sole proprietor to have business and personal debts discharged.
Concerns About Needing to Close the Business
Many business owners mistakenly assume that all types of business bankruptcy require the business to close, and for many small business owners in South Florida, closing the business can mean giving up on a multi-generational family company or a dream of being a retail or restaurant owner in the community. We want to make clear that many business bankruptcies do not require you to close the business. In fact, if you file for Chapter 11 or Subchapter V bankruptcy, you can continue running your business throughout the bankruptcy case, and you can actually restructure debts and catch up on payments with creditors.
In order to be eligible for Chapter 11 bankruptcy and for the case to be successful, you will want to ensure that your business will have a way of earning a profit and paying creditors in the future. Since Chapter 11 bankruptcy is especially complex, it is important to talk with an attorney to determine whether your business is eligible for Subchapter V, which is a type of Chapter 11 bankruptcy that is typically filed by small business debtors. It has the same benefits as a traditional Chapter 11 bankruptcy but costs less money and is more streamlined.
Contact a West Palm Beach Bankruptcy Attorney
Determining whether bankruptcy is right for your business can be a complicated and difficult decision, but you should know that one of the experienced West Palm Beach bankruptcy lawyers at Kelley Kaplan & Eller can assist you. We can answer any questions you have and provide you with detailed information concerning the business bankruptcy process and what you should expect.