While you wish for another option, you have no choice but to file for business bankruptcy. Do you know which chapter fits your situation?
Fundera breaks down three bankruptcy options for companies. Learn how to put yourself on the path to success after filing.
Most business owners file for Chapter 7 bankruptcy. If you do not have the financial means to keep the doors of your business open or repay commercial debts, you may feel this chapter fits your desires. After filing, you shut down your business and liquidate assets. Prepare to offer proof that your business’s income does not support a financially stable operation.
If you would rather keep your business open while reshuffling your financial deck, Chapter 11 bankruptcy may work for you. The option involves selling non-performing business assets and revamping your long-term debts. To qualify for this option, your operation must have regular revenue. You must also create a reorganization plan that receives the court’s approval.
If you run a business as a sole proprietor or have a small business with only a few lenders, you may qualify for Chapter 13 bankruptcy. The option has debt limits, so research the latest requirements before seriously considering this chapter. Just like with Chapter 11, Chapter 13 bankruptcy lets you keep your business open. You must also create and submit a reorganization proposal. If the court accepts your plan, you have three to five years to repay your debts.
Giving up your current business and filing for bankruptcy could work better than you think. After filing, you may have the means, knowledge and experience to start another company better than the last.