Running a business can be very difficult. Whether you are just starting out or have a large company, sometimes all it takes in a downturn in sales to cause financial trouble. Recently, the news has been filled with huge, national companies filing bankruptcy due to low sales. Keeping a business afloat can be a hard job requiring a lot of work, but in some cases, no matter how hard you work, your business still may face bankruptcy. Accoridng to the United States Courts, you have two general options: Chapter 7 or Chapter 13.
Chapter 13 bankruptcy allows you to keep your business open. You create a repayment plan to repay creditors according to your income. If you file chapter 7, though, you will not be able to keep your business open. This is often referred to as liquidation because the court will take and sell all of your business assets to get money to pay your creditors. Chapter 13 is more common because it does allow you to continue operations, but Chapter 7 may end up being the best option.
You will have to pass a means test, which is based on your income. You cannot file Chapter 7 if, over the last five years, your aggregate current monthly income is over $12,850 or 25 percent of your nonpriority unsecured debt. Do note it must by at least $7,000. You must meet all the other requirements to file this type of bankruptcy just as an individual filer would.
Making the decision to file bankruptcy is not an easy one, especially when the future of your business hangs in the balance. Sometimes, though, you have to do what is best financially, which could be closing your business and filing for Chapter 7. This information is for education only. It is not legal advice.
