Naturally, being a business owner involves a lot of risks, and at times the result is a payoff, but not all the time. When things don’t go so well for a business, the owner is the one responsible for the fallout. The owner may have some debts related to the business, and when the income begins to dwindle, they cannot keep up with the debt payments. If this sounds familiar to you, it may be the moment to turn to bankruptcy.
Deciding to File
There is no shame in bankruptcy, in fact, it’s meant to help people find relief from debts that keep them stuck in a cycle that only pulls them deeper. So if you are a business owner and you’re faced with closing a business that has a lot of debt, filing for bankruptcy may be the right choice for you. Often business owners may think the business needs to file, when in fact if they have guaranteed the debts themselves, it’s likely the business won’t be eligible, but its owner will be.
Where to Start?
For some, bankruptcy can seem intimidating, and while it is complicated, you shouldn’t be afraid of filing. A good bankruptcy attorney can help you determine whether this is the right solution for you as a business owner, as well as navigate the next steps. Some attorneys, such as myself, offer a free initial consultation in which we assess your individual situation. Working with an attorney who specializes in bankruptcy is highly recommended because we are experienced with the process. After over 20 years of helping people find financial freedom, I can confidently speak to each new client’s situation.
Determining Your Eligibility
Many small business owners can find relief from their business-associated debts by filing for bankruptcy. Often I would begin by determining their eligibility to file for Chapter 7. The main things to consider with this type is the means test. This test examines whether your means, income, are not enough to keep up with your debts. Individuals with a high income may not pass the means test, but there are some exceptions that can help you still pursue Chapter 7. One of the main things that can get in the way is the amount of consumer debt (personal, non-business related) versus non-consumer debt (business related). To file for Chapter 7 with an exception, your non-consumer debts must be greater than 50% of your overall debts – which includes your mortgage.
Don’t fret if you don’t meet the Chapter 7 requirements. Chapter 13 may be your next option. Chapter 13 is a plan where rather than discharging all of your debts within 90 days, we would determine together the amount you could repay over a set period of time based on income. Then remaining debts would be discharged.
Why Bankruptcy For a Failing Business?
If you’ve tried everything to save your business but know that it is facing its demise, as the owner, filing for bankruptcy can help neatly close down the business and keep you from paying on the related debts for years to come. It can allow you to start over without worrying about the ghosts of work past.
Whatever you do, don’t let fear keep you from pursuing a fresh start financially! I would be more than happy to help you consider your options and discuss what filing for bankruptcy might look like for you as a business owner. You can give me a call to setup a free initial consult and get on the road to a new beginning. Reach my office at 651-454-0007 or request a consultation online.