How to File Bankruptcy for a Small Business
When starting up a small business, everyone wants to believe they will be successful and capable of making a living with their product or service. The business world can be a tricky place where many factors can influence success. When it gets to the point that you don't see yourself able to recover, then it may be time to think about bankruptcy to help dig from under the debt.
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Instructions
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Determine your business set up, i.e., what kind of business you are in the eyes of the law. A corporation and partnership are eligible for Chapter 7 and Chapter 11 bankruptcy while a sole proprietorship is eligible for Chapter 7, Chapter 11 and Chapter 13.
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Choose a bankruptcy chapter. Chapter 7 bankruptcies will close the business and sell off all assets to pay back any debts that are not discharged. If you want to save the business, then this is not the choice for you. Chapter 11 is a reorganization bankruptcy that develops a payment plan with a creditor committee that will use future revenue from the business to pay back debt. Chapter 13 creates a payment plan that is overseen by the bankruptcy administrator. This payment plan does not have to use future revenue from the business; rather it takes personal income from the business owner.
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Attend a credit counseling session. If you are a sole proprietor filing for bankruptcy, then you must attend an accredited bankruptcy credit counseling session and provide a certificate of completion prior to filing for bankruptcy. The session will provide a bankruptcy overview and budget analysis and last about 90 minutes. Accredited bankruptcy counseling agencies can be found at the National Foundation of Credit Counseling's website.
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File for bankruptcy. As a business owner, the actual filing will likely be done by a lawyer at the district U.S. Bankruptcy Court that serves your area. Depending on the bankruptcy type, you will need to submit the bankruptcy and filing fees, statement of income, statement of any possible near term income increase and federal student loans.
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