An insolvent small business may survive and even thrive after filing for bankruptcy. Your decision to file Chapter 7, 13, or 11 bankruptcy will depend on:
- what the firm does
- the company’s structure
- assets owned by the company, and
- the amount of money available to pay off a debt
Continue reading to learn more about the considerations that decide whether a company bankruptcy is a viable choice. In addition, many business owners declare bankruptcy on their own. Consider how removing personal debt can aid in the survival of your company.
To know the most suitable legal path, discussing your situation with a competent Charleston, WV bankruptcy attorney is best.
Keeping Your Business Afloat: Considerations
Before continuing or ending your business, you should consider a few factors. Here are a few key points to keep in mind.
- Is the company profitable?
If your company continuously loses money, shutting down may be the best solution. Take the example of a lucrative business currently experiencing difficulties due to temporary circumstances.
However, it’s critical to be practical when staying open. Often, entrepreneurs pour money into a business long after it should be shut down, hoping it will succeed.
- Is the value of a company’s assets much higher than its liabilities?
It should go without saying that if your company has more assets than liabilities and is still profitable, it’s worth saving. Reorganizing debt in bankruptcy (or removing it if you’re a sole owner) can be just what you need to keep your business viable.
You may want to consider ending the business by selling its assets and paying off its debts outside of bankruptcy if bankruptcy options aren’t viable (unless the trustee handles this for you, keep in mind the pitfalls of this approach). In most circumstances, you will save money while increasing the amount of money available to creditors.
However, if your business is severely underwater, you may already know it is time to cut your losses.
- Can you personally be held responsible for your company’s debts? While negotiating with creditors, keeping your company going (instead of taking on more debt) might be better.
The firm’s creditors may be forced to pursue their personal assets if the company is closed due to insufficient assets to pay their debts. Alternatively, the business owner can also file for personal Chapter 7 bankruptcy.