If you’re a business owner going through a rough time, you’ve probably considered filing for bankruptcy to save your business and assets. But there has been no one around to either encourage or discourage you to go with one of the bankruptcy options for small businesses.
Besides, what’s the difference between Chapter 7 vs 11 vs 13 Bankruptcy anyway? Today, our best bankruptcy attorney in Salt Lake City – Justin M. Myers – is going to answer your burning questions about business bankruptcy.
How to file for bankruptcy (and how NOT to)
You’ve probably heard about the ongoing scandal brewing over Breitburn Energy Partners LP’s bankruptcy, which the oil producer giant filed for in 2016. Shareholders of the company, which has been bankrupt for over 18 months, are taking legal action to prevent the company from obliterating their investment and feeding them with a large tax bill as crude prices continue to rise.
Breitburn, which filed for Chapter 11 bankruptcy protection after oil prices had collapsed to below $30 a barrel from over $100 in 2014, is being accused of using a “scheme” to hand out their assets to creditors while hurting the bankrupt company’s stakeholders in the process.
Clearly, something was wrong with Breitburn’s bankruptcy strategy, and now bankruptcy attorneys on both sides are trying to figure out the best way out.
Our Salt Lake City bankruptcy lawyers at JMM Legal are going to review three bankruptcy options for business owners in Utah and all across the nation to prevent you from landing in legal trouble similar to what Breitburn is now facing.
Bankruptcy options for business owners in Utah
The choice to file for bankruptcy as a business owner never comes easy. It takes weeks of Googling, consulting bankruptcy lawyers, talking to creditors and your bank, and the while learning thousands of new legal and banking terms and getting more confused every day.
But it doesn’t have to be that complicated when you have an experienced bankruptcy attorney by your side who would lay out a viable bankruptcy plan to save your business and prevent you from losing all your hard-earned assets.
As a start, let’s review the three bankruptcy options for sole proprietors (business owners) in Salt Lake City and elsewhere in Utah.
Note: if you’re the sole proprietor of your business, the business is not considered a separate entity. Meaning: creditors don’t differentiate between you and your business, which means you’re responsible for its debts.
What it means for you when filing for bankruptcy as a business owner is that your claim must include both your personal and business debts and assets, our bankruptcy attorneys at JMM Legal say.
Chapter 7 Bankruptcy vs Chapter 13 or 11 Bankruptcy
What’s the difference between Chapter 7 Bankruptcy vs Chapter 13 or 11 Bankruptcy, you may be wondering?
If you’re filing for Chapter 7 Bankruptcy as a sole proprietor, its major advantage is that your business and personal debts will be wiped out without obliging you to make regular payments for a specified number of months or years.
Note: not all types of debts are being discharged when filing for Chapter 7 Bankruptcy. Consult our Salt Lake City bankruptcy lawyers to find out whether or not all of your debts would be wiped out after filing for Chapter 7.
Besides, when filing for Chapter 7 Bankruptcy, all of your assets – both business and personal –will immediately become the property of the bankruptcy estate. There are also the so-called exempt assets that you’re allowed keep and use in certain cases.
Our bankruptcy attorneys at JMM Legal conclude: filing for Chapter 7 Bankruptcy is a good option if you don’t have much property. If you have a huge estate, on the other hand, think twice before filing for Chapter 7, as your most essential assets could be lost.
Filing for Chapter 13 Bankruptcy as a business owner (or Chapter 11 if your debts exceed those that are permitted under Chapter 13), meanwhile, is your best option if you want to keep your business up and running while being bankrupt.
Note: in order to file for Chapter 13 or 11 Bankruptcy, you will be required to have enough monthly income to be able to make payments every month (those payments, however, will be much smaller than your current payments).
Consult our Salt Lake City bankruptcy attorneys to find out which bankruptcy option would be best for your particular business and your particular situation. Let our experienced attorneys walk you through bankruptcy laws and give you A-to-Z pros and cons of each bankruptcy option.