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Can a Chapter 7 filing help struggling family business owners?

Individuals, rather than businesses, may more commonly utilize the liquidation provisions offered by a Chapter 7 bankruptcy filing. However, a recent article reminds us that this type of bankruptcy may also be appropriate for sole proprietorships and/or family-owned businesses. 

A Chapter 7 is a legal way to discharge unsecured debts, which may have accrued from expenses such as credit card charges or medical bills. In exchange, the bankruptcy trustee will liquidate a debtor’s nonexempt assets. The process can be as quick as four months. 

Does a business have exempt assets? It depends on how the asset was purchased. Chapter 7 exemptions are largely geared toward individual acquisitions such as a home, household goods, vehicles and retirement accounts. However, a family-run business might have similar assets, and should investigate this issue with the help of an attorney. 

Our law firm focuses on bankruptcy law, and we recommend Chapter 7 in situations where a debtor does not have a large amount of equity or assets. In addition, there is a means test, where a debtor must meet certain income restrictions to be eligible for a Chapter 7. The test is intended to determine whether a debtor actually has the ability to repay some of his or her creditors.

For those seeking to preserve their equity or who do not qualify under the means test, a Chapter 13 might be more appropriate. Ultimately, an attorney can help review a debtor’s financial situation and advise on the various options that might be available. Our law firm offers a free initial consultation in this regard.

Source: Tampa Bay Business Journal, “Steel City Brewhouse in St. Pete files for Chapter 7 bankruptcy,” Margaret Cashill, Oct. 15, 2015

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Goldman & Beslow, LLC is a Federal Debt Relief Agency by an Act of Congress. We have proudly assisted consumers seeking relief under the U.S. Bankruptcy Code for over 38 years.

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