You may be feeling a sense of despair if your business is facing bankruptcy. But if you are able to access the correct legal advice, the right expert can steer you in the right direction.
It may be an option you never expected to be taking, but looking at the different types of bankruptcies might paint an even more miserable picture. Learning more about these will help you to make an informed choice.
But do you know everything that is involved?
In this article, we will give you the types of bankruptcies. Keep reading.
Straight Bankruptcy
One type is called “Straight Bankruptcy”, also known as liquidation. This is when the company owner cannot pay his or her debts. The company owner’s property is sold and the money is used to pay the creditors.
This type is very difficult for the business owner because it can take years to pay off the debts.
Sole Proprietorships
In a sole proprietorship, the business owner is personally liable for all the debts of the business. This means that if the business owner files for bankruptcy, their personal assets are at risk. This can lead to financial ruin.
Partnerships
Each partner is jointly and severally liable for the debts of the partnership. This means that if one partner files for insolvency, the other partners are still responsible for the debts. This can ruin relationships and lead to legal disputes.
Chapter 7
On this page, the court will appoint a trustee to oversee the process and your assets will be sold off to repay your creditors. This can be a very difficult and stressful process for business ownership, as it can be difficult to rebuild after declaring bankruptcy.
Chapter 11
In this type of bankruptcy, the industry is able to stay open and continue operating but must reorganize its finances and restructure its debt. This can be a long and difficult process, and often ree enterprises to give up some control to the court.
Chapter 13
Under Chapter 13, small business owners are required to repay their debts over a three to five-year period. This repayment plan is based on the business owner’s income and ability to repay the debt. While this type may be beneficial for some businesses, it can be a huge burden for others.
This can lead to business owners incurring more debt, as well as damaging their credit scores.
How to Avoid These Types of Bankruptcies
To avoid these types of bankruptcies, If you are a business owner, it is important to keep track of your finances and make sure you are not overspending. If you are struggling to make ends meet, you may want to consider downsizing your business or taking on a partner. It is also important to create a budget and stick to it. You can also look at attorneys such as a Baltimore bankruptcy attorney.
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