Small Business Bankruptcy Lessons that You Must Know
If you are considering small business bankruptcy, you probably have a million questions. You know that to get your questions answered by a small business bankruptcy attorney is going to cost you a bundle.
To help you get some bankruptcy answers, we have written this web page with the small business owner in mind. After reading this page and you still have small business bankruptcy questions, then you should consult your attorney.
What choices do I have?
Your first choice is to decide to take small business bankruptcy or not. We
recommend that you only file with the court after you have thoroughly explored
all turnaround choices for your company.
A publication that explains this thoroughly for the entrepreneur is The Insider Secrets to Saving Your Business: The Step-by-Step Turnaround Guide. The 465-page manual gives you small business bankruptcy alternatives and shows you in detail how to fix your company.
What is the difference between Chapter 7 and Chapter 11 small business
bankruptcy?
You must decide which form of small business bankruptcy makes sense for you.
If you have given up all hope for your firm, then Chapter 7 probably makes
the most sense. This is a liquidation. You file with the court and then walk
away from your business. A trustee takes care of the liquidation.
Chapter 11 is reorganization. With this type of bankruptcy, you file with the court and your business continues running with protection from its creditors. During the bankruptcy procedures, you, the creditors and the judge agree on a plan to reorganize the finances and balance sheet of your company. Usually, the outcome is the creditors end-up owning the company with you and other investors with nothing.
Can the small business owner be sued?
Yes. Once your firm gets into trouble and becomes insolvent (more liabilities
than assets,) you have a duty to your creditors to run your company in
good faith and in the benefit of the creditors.
This is called fiduciary duty. If, for example, you start moving assets from the company’s name into your personal name, your creditors can sue you for failing your fiduciary duty to them. Also, when you are in court, this transfer may be consider a theft and you could have criminal penalties as well.
I know that I didn’t answer a million questions, but I hope we got some of your general questions answered.
Privacy Policy - Terms of Use - Legal Disclosures