Some small business owners in Ohio who have encountered unexpected financial difficulties may be exploring possible remedies. Fortunately there are several options under the Bankruptcy Code that might allow a business to continue rather than just shutting its doors. Careful consideration is required before these important decisions are made.
If a sole owner of a small enterprise wants to cease business operations, Chapter 7 bankruptcy may be suitable because most business debts and unsecured personal debt can be eliminated in exchange for the liquidation of the company and personal assets. The proceeds from the sale of the assets will be distributed by a court-appointed trustee among creditors. However, it may affect the individual's credit rating for several years to come.
Another option for sole proprietors is Chapter 13 bankruptcy. This will allow the business to continue to operate while debts are paid off over an extended period, typically from three to five years. Once a court approves a proposed repayment plan, the business continues operations under the supervision of the appointed trustee. This option provides relief from accumulated debts and may lower monthly obligations. A sole owner may be able to include some personal debts into the repayment plan, providing further relief.
Chapter 11 bankruptcy is specifically aimed at businesses. Although it is similar to Chapter 13, it is only suitable for companies with more than one owner. The business may not be connected to the personal finances of any of the owners. The opportunity to grow and thrive will be available through restructuring the company's debts while also being allowed to continue operations.
These are the basics of the different bankruptcy options, and the laws concerning each alternative have unique complexities. Any Ohio business owner may benefit from consulting with a business bankruptcy attorney to gain more information. Filing for bankruptcy needs the same level of planning and consideration as is required for starting a business, and having the guidance and support of an experienced attorney can be invaluable.
Source: business2community.com, "4 Options You Should Know When Your Small Business Fails", Accessed on Dec. 19, 2015