Are You a Struggling Small Business Owner? How Filing Bankruptcy Can Save Your Assets

Submitted by Rachel R on Mon, 05/12/2014 - 1:53pm

Are You a Struggling Small Business Owner? How Filing Bankruptcy Can Save Your Assets

Small business owners deep in debt may need bankruptcy assistance

Owning your own business can be part of the American dream. But if your business starts to take a nosedive, it can quickly turn into a nightmare. Most small business owners personally guarantee the debts they take on when they rent or buy office space or buy inventory or equipment. If you can't make your payments on these debts, you may be worried that your creditors will come after your personal assets like your home or bank accounts. This is a valid concern because it absolutely can happen.

What type of business owners can wipe out debt in bankruptcy?

There are different types of bankruptcy for different situations, but personal bankruptcy is one of the least complex type of filings. If you are the sole proprietor of your business, filing a Chapter 7 bankruptcy will wipe out your business debts just as if they were personal debts – this also works if you're a Subchapter S owner. If you own a corporation or an LLC, personal bankruptcy is not an option – you'll have to pursue Chapter 11.

What type of business debts can be relieved in bankruptcy?

Because this is essentially a personal bankruptcy, all of your business assets are considered personal assets. If you're financing assets such as equipment or office space, you will have to give back the asset in order to have that secured debt wiped out. If you own some business assets free and clear, the Trustee may want to liquidate these to help pay your creditors. Other debts that can be wiped out include:

  • Rents due to your landlord (but you have to vacate the premises)
  • Employer portion of payroll taxes (in some circumstances)
  • Bills due to suppliers
  • Payments due to independent contractors
  • Business credit card debts
  • Equipment rental fees (but you have to return the equipment)
  • Bills owed to most vendors (legal bills, insurance bills, etc)

What type of business debts cannot be relieved in bankruptcy?

As with any Chapter 7, there are some debts that cannot be relieved in bankruptcy and that you will still have to find a way to pay. These include:

  • Payroll taxes withheld from employees
  • Income taxes (unless certain criteria are met)
  • Loans owed to a 401(k) plan
  • Cash advances over $825 taken within two months of filing
  • Personal liabilities such as alimony or child support payments
  • Court judgments for fines or damages

When should you consider filing bankruptcy for your small business?

If your small business is drowning in debt and you don't see that you'll be able to generate enough revenue to ever dig out, filing bankruptcy may be your best option. If, however, you can liquidate your business assets to pay your bills so that you're at a break-even position, this may be a preferable option. Filing Chapter 7 for any reason will result in a ding on your credit rating. If you then decide to start up a new business venture, this can affect your ability to rent equipment, office space or get vendors to contract with you.

If you own a small business in North Carolina that's struggling, contact the law offices of John T Orcutt for a free consultation. We'll take a look at your business income, debts and financial position and offer you valuable advice on your best strategy for getting out of debt, whether it's bankruptcy or another option. Call us today – we have worked with many struggling small business owners to help them protect their home, cars and other assets from their business creditors.

Debts Hurt! Got debt? Need help? Get started below!

Serving North Carolina

  • Charlotte
  • Fayetteville
  • Durham
  • Wilson
  • Greensboro
  • South Raleigh (Garner)
  • Southport (Phone Consults)
  • Wilmington (Phone Consults)

North Raleigh

6616 Six Forks Rd Suite 203 Raleigh, NC 27615 North Carolina

Tel: (919) 847-9750

North Raleigh

Charlotte

7400 Carmel Executive Park Dr Suite 105 (In affiliation with Jack G. Lezman, PLLC) Charlotte, NC 28226 North Carolina

Tel: (704) 318-2702

Charlotte

Fayetteville

2711 Breezewood Ave. Fayetteville, NC 28303 North Carolina

Tel: (910) 323-2972

Fayetteville

Durham

1738 Hillandale Road Suite D Durham, NC 27705 North Carolina

Tel: (919) 286-1695

Durham

Wilson

2215 Nash St. NW Wilson, NC 27896 North Carolina

Tel: (252) 234-9194

Wilson

Greensboro

600 Green Valley Road Suite 210 Greensboro, NC 27408 North Carolina

Tel: (336) 542-5993

Greensboro

South Raleigh (Garner)

143 Highway 70 Garner, NC 27529 North Carolina

Tel: (919) 747-4400

South Raleigh (Garner)

Southport (Phone Consults)

4320 Southport Supply Road SE Suite 300 Southport, NC 28461 North Carolina

Tel: (910) 218-8682

Southport (Phone Consults)

Wilmington (Phone Consults)

4320 Southport Supply Road SE Suite 300 Southport, NC 28461 North Carolina

Tel: (910) 447-2987

Wilmington (Phone Consults)