If you are a small business owner in North Carolina, you know that it is impossible to predict everything that will affect your company. Changes in government regulations, natural disasters, and trends in customer buying habits may leave you in a financial bind. If this happens to you, then bankruptcy may be your best solution. There are different types of bankruptcy, so you need to pick the kind best fitting your needs.
Chapter 7 bankruptcy
Filing under Chapter 7 of the Bankruptcy Code may be a solution if you are a sole proprietor as you can wipe out your personal and business debt with one proceeding. If you own a company that does not require a lot of equipment, then you may still be able to operate without trying to pay off current vendors.
Are there drawbacks to a Chapter 7 bankruptcy?
Yes, there are drawbacks to a Chapter 7 bankruptcy. Unless you are a sole proprietor, you will have to pay back any debt you took out in your name. The trustee sells your business assets, and your business gets shut down. Since trustees are seldom experts in your niche market, then you may be able to sell the assets and pay down more of the debt on your own before filing for bankruptcy, but there are several limitations on this course of action.
Chapter 13 bankruptcy
Only individuals can file Chapter 13 bankruptcy, so this usually only works for sole proprietors. Under this form, you propose a payment plan that has to be approved by the court. It will last for up to five years and, if complied with, many remaining unsecured debts will be discharged. There are several eligibility requirements that an experienced attorney can outline for you.