Texas is known for being one of the best states in which to operate a business. Nevertheless, small enterprises are prone to financial problems, especially during economic downturns. If your business experiences severe financial difficulties and bankruptcy seems your only option, it is important that you work with a College Station bankruptcy attorney who understands the process and can guide you to an optimal outcome.
Business Debts and Liability
The most important issue that must be taken into consideration from the outset when considering bankruptcy is who is liable for the debts of the business. To a large degree, this is dictated by the type of business you operate. If you are a general partner in a partnership or a sole proprietor, you are liable for any business debts. As a partner, the extent of your indebtedness may depend upon the percentage of the business you own.
If, on the other hand, your business is a corporation or limited liability corporation, you are not responsible for any debts incurred by the business. An exception to this occurs when you sign a personal guarantee on a business loan for the company. Also, if you are a limited partner, you most likely will not be held personally responsible for business debts.
Deciding Which Type of Bankruptcy Is Right for Your Business
Among the business bankruptcy options—Chapter 7, Chapter 11, and Chapter 13—you cannot file a Chapter 13 if you operate a corporation or LLC. Chapters 11 and 13 are both designed to reorganize debt. If you wish to remain in business you will likely need to file a Chapter 11. The downside to this option is that Chapter 11 bankruptcies are significantly more expensive and difficult to obtain than other types. With a Chapter 11 your business’ creditors will have the power to vote on whether or not to approve your reorganization plan. Moreover, if your Chapter 11 is approved you will need to file operations reports on a regular basis and satisfy your creditors that your reorganization plan is working.
One alternative to the above applies if yours is a sole proprietorship or you are a general partner. In such a case you can file a Chapter 13 personal bankruptcy and thereby reorganize debts. This is acceptable to bankruptcy courts because, as noted, from a legal standpoint no distinction is made between your personal debts and business debts.
If you file a Chapter 7 business bankruptcy you are, in essence, throwing in the towel and liquidating your company. If you wish to remain in business this would not be a good option. However, if you run a sole proprietorship or you are a general partner then filing a Chapter 7 personal bankruptcy can allow you to liquidate debts while keeping your business.
We Can Help You File Your Small Business Bankruptcy
If your small business has suffered under the burden of overwhelming debt, a business bankruptcy may be your best solution. Call a College Station bankruptcy lawyer today at Peterson Law Group: 979-703-7014 or 936-337-4681.