Bankruptcy for Small Businesses

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If your small business is inundated with debt, you can file for Chapter 7, Chapter 13, or Chapter 11 bankruptcy. Before you decide on what type of bankruptcy to file, you need to determine if you should file a personal bankruptcy or a business bankruptcy.

If you are personally liable for your business's debts, you should probably file a personal bankruptcy. You are personally liable for business debt if your business is structured as a sole proprietorship or general partnership. Personal liability means that creditors can go after your personal assets (your income from another job, your home, or other property) if your business does not pay its bills. Most small business owners that file for personal bankruptcy choose Chapter 7 or Chapter 13. Rarely is Chapter 11 a good choice for small businesses.

If your business is structured as a corporation or LLC, the business is responsible for paying business debts, not you (although there are some exceptions which are covered in the articles below). If you want to file for bankruptcy, you'll have to do so on behalf of the business (this is often called a business bankruptcy). You can do so under Chapter 7 or Chapter 11 -- Chapter 13 is not available to business entities.

Read the below articles to determine if you are personally liable for your business's debts, decide if Chapter 7 or Chapter 13 is the better option, and learn about other issues related to filing bankruptcy for your business.