Most people think of bankruptcy as an option only for individuals or for large corporations. But small businesses can also benefit by filing bankruptcy, and doing so can keep your family business afloat. A good majority of small family owned businesses are structured in such a way that a Chapter 7 or perhaps a Chapter 13 bankruptcy case will be an option. In either of these types of cases a business can reduce or eliminate its debt, which can allow it to stay open and build up its cash flow.
The way filing bankruptcy can save your family owned business is as follows:
• The instant a case is filed your creditors are prohibited from contacting you. This break in collection calls or even collection lawsuits gives you a chance to take stock and come up with a plan to get back on track.
• All debts in the name of the entity that files a case are subject to the discharge, meaning they are no longer due once your case is over. Depending on the type of case you file, you can either eliminate certain debts all together or at least pay a reduced balance.
• For the things you need to keep in order to run your business, you can do so through the bankruptcy and often times the terms will be more desirable. Once you file a case your attorney will be in a position to start negotiating with your lenders and coming to solutions that are manageable financially.
Keep in mind that if you have personally guaranteed any of the debt of your family owned business, you will still be personally liable for that debt if you do not file a case of your own. A case filed in the name of your business will not act as a case filed on your behalf personally. But a lot of times you can stave off creditors by filing a business case, because during that process an agreement can be made regarding repayment of the debt or surrender of the collateral in lieu of repayment. When properly negotiated, these types of agreements can work to relieve you of any deficiency balance that may be due after the collateral is recovered and resold, or after your business pays a lesser amount. For more information on what to do if your family owned business is struggling, call our office.
For more information about bankruptcy, contact us at www.DsouzaLegalGroup.com. We will help by coming up with solutions that work for you.