Phoenix Small Business Bankruptcy
Filing for bankruptcy can help a challenged Phoenix small business live to see another day and often find success. What kind of bankruptcy you choose may hinge on how the business is set up, what it’s making and, of course, what it has and what it does.
Is the business actually generating income? If not, the best move may be shutting the doors and eliminating the liabilities that fall to you either outright in Chapter 7 bankruptcy or by potentially paying pennies on the dollar in Chapter 13 bankruptcy; however, if your company is having a hard time right now but there is an upturn in sight, it might make sense to keep it going and stay the course.
Generally, if you own a company in Arizona and you have some form of corporate structure in place(S-Corp, LLC etc.) opting to file a Chapter 7 bankruptcy on behalf of your business will effectively close the business down. The trustee will normally sell the business assets, pays the creditors to the extent possible, and shuts the business down.
Where there are at least some assets, a business Chapter 7 is often not a very attractive option. After all, you can wind down a business without a bankruptcy trustee and you might get a better price for the assets of the business than the trustee would. On the other hand, a business Chapter 7 bankruptcy does offer transparency: You don’t sell the assets, the trustee does and this makes it far less likely that an aggrieved creditor will cry foul later on.
A sole proprietor is responsible for both personal and business debts. When you file the Chapter 7 bankruptcy, you get to use available exemptions to protect your personal and business property and you’ll get to eliminate both business and personal debt.
If you are operating as a sole-proprietor and your business is service-oriented, bankruptcy might make keeping your business going a tenable proposition. After all, if you are a freelance copywriter, an accountant, a creative or a therapist, a Chapter 7 trustee can’t really sell off your skills or your experience as assets. This makes bankruptcy a good option for sole proprietors because it will erase the business debt while allowing the sole-proprietor to stay in business.
As noted above, if you are a sole proprietor, you can include both personal and business debts in your Chapter 13 bankruptcy just like you can in a Chapter 7 bankruptcy. A Chapter 13 bankruptcy is often the way to go if you anticipate income coming in.
In Chapter 13, you might be able to keep things going while paying less out of pocket every month on all your debt obligations. Chapter 13 is often the better choice if you have substantial inventory or equipment that you would otherwise lose in Chapter 7.
Partnerships, LLCs, S-Corps and other corporations cannot file Chapter 13 bankruptcy in order to reorganize debts and stay in business. These businesses are stuck filing Chapter 11 if they want to keep assets(equipment, inventory, goodwill, accounts receivable, etc.) and pay creditors through a repayment plan. The problem in Arizona anyway is that while Chapter 11 is similar to Chapter 13 in many respects it is normally much more complicated and expensive.
If you have a business and debt is becoming a real problem let us know. At Phoenix Fresh Start Bankruptcy Attorneys, we are always happy to consult with Phoenix area consumers with debt while problems of any kind. As a long time business owner, I get how tough it can be to deal with debt while trying to make payroll and build for the future.