Small Business Bankruptcy without a Lawyer?

Many small business owners may choose to file bankruptcy when they are unable to meet the financial obligations of their creditors. If you are thinking about filing bankruptcy without a lawyer, you may want to reconsider that decision. The American Board of Certification certifies attorneys who specialize in business bankruptcy. These professionals are required to meet rigorous standards and display exceptional knowledge when it comes to dealing with businesses and the legal proceedings regarding bankruptcy filings.

Pick a Chapter—7 or 11

The federal law allows business owners to file for Chapter 7 or Chapter 11 protection. If your goal is to liquidate your assets and discharge your debts, Chapter 7 is the way to go. The court will appoint a Trustee to collect all non-exempt assets and distribute the proceeds to the creditors. This is good for small business owners if their personal finances are significantly impacted. It is much less expensive and the entire process can be done with 3 to 6 months.

Chapter 11 allows the business to undergo a reorganization process. The primary goal is to restructure the debts so that the business can meet its obligations from future earnings, while still retaining primary control. If the bankruptcy court determines that there has been fraud or mismanagement, they will appoint a U.S. Trustee to take over the operations during the remainder of the bankruptcy proceeding. This type of bankruptcy is usually reserved for large corporations or partnerships because the length and expense involved in the process may be overwhelming for small business owners.

Sole Proprietorship & Chapter 13

A sole proprietorship has the option of choosing to file chapter 13 rather than 11 when restructuring their debts. The court will require you to propose a repayment plan regarding how your debts will be paid off during the 3 to 5-year period. Once your petition is filed, the court will issue an automatic stay, which prohibits all debt collections, meaning that your creditors cannot harass, foreclose on your house or repossess your property.

Getting Advice From a Business Bankruptcy Lawyer

The federal laws governing bankruptcy proceedings are extremely complex and difficult for most people to understand. In some cases, you may be able to keep your house under the homestead protection laws. Federal law allows you to claim up to $125,000 for a homestead exemption, but some states, such as Kansas, Florida, Iowa and Texas allow the homeowner an unlimited amount they can claim as exempt. Trying to file a bankruptcy without a lawyer may leave you open to liability for debts in certain cases. Therefore, it is important to consult with an experienced business bankruptcy for advice before making any decisions.