Filing for bankruptcy as a business owner can be extremely complicated, and it is important to understand how the complexities of U.S. bankruptcy law are likely to affect your case. There is a lot of important information for business owners to know about bankruptcy, and our experienced bankruptcy attorneys have outlined five important things for business owners to know in Nashville, Cookeville, and throughout the state of Tennessee.
1. Businesses Typically File for Chapter 11 or Chapter 7 Bankruptcy
In most cases, businesses that are filing for bankruptcy will file for either Chapter 11 bankruptcy or Chapter 7 bankruptcy. These two types of bankruptcy both allow businesses to come to terms with their debts, but there are many important distinctions between them. Chapter 7 bankruptcy is a type of liquidation bankruptcy, so it is for business owners who understand the business needs to close and remaining assets that are of value must be liquidated to repay creditors. Chapter 11 bankruptcy is a type of reorganization bankruptcy that allows the business to reorganize its debts.
2. Chapter 11 Bankruptcy Can Allow Your Business to Continue Operating
While a Chapter 7 bankruptcy requires a business to close, many businesses that need bankruptcy protection want to file for Chapter 11 bankruptcy because it is a type of bankruptcy that allows a business to continue operating while getting back on track with debts. To be clear, a business in Chapter 11 bankruptcy does not have to close, but instead can develop a plan for repaying business debts over a period of time while keeping its doors open.
3. Chapter 7 Bankruptcy is Available for Individuals but Handled Differently for Businesses
Both individuals and corporate businesses can file for Chapter 7 bankruptcy, but the cases are handled differently. For an individual’s Chapter 7 bankruptcy, that individual must pass the “means test” and will be eligible to have debts discharged at the end of the case. For a corporate
business, there is no need to pass the means test, and there is no need for a debt discharge at the end of the case since the corporation is no longer operating and all the assets of value have been administered by a Chapter 7 Trustee.
4. Sole Proprietorships Have Important Distinctions to Consider
If your business is a sole proprietorship, you will need to approach bankruptcy differently than other business owners since you and your business are the same legal entity. In other words, filing for business bankruptcy will mean filing a personal bankruptcy, or vice versa. Accordingly, sole proprietors who file for Chapter 7 bankruptcy will need to consider issues for consumers, but they also may be eligible for Chapter 13 bankruptcy or Chapter 11 bankruptcy.
5. Business Owners Filing for Consumer Bankruptcy May Have Special Considerations
Depending upon the structure of your business, filing a personal bankruptcy ultimately could affect your business—especially if your business is a sole proprietorship for the reasons discussed above. You should seek advice from a lawyer about your situation.
Contact Our Middle Tennessee Bankruptcy Lawyers Today
If you are a business owner and you have questions about filing for bankruptcy, it is important to seek advice from an experienced Middle Tennessee bankruptcy attorney who can assist you with your case. Our firm can help you to determine the right course of action for your business. Do not hesitate to get in touch with us to find out more about how we can assist you. Contact Lefkovitz & Lefkovitz online today for more information. You can also reach us by phone in our Nashville office at 615-256-8300 or in our Cookeville office at 931-528-5297.
