Bankruptcy for Small Businesses

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. Most small business owners that file for personal bankruptcy choose Chapter 7 or Chapter 13, although sometimes Chapter 11 is a good option too.

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.

Business Bankruptcy Considerations: Getting Started

The Differences Between Personal and Corporate Bankruptcy

Bankruptcy is a common tool used by both individuals and businesses in order for them to get rid of debt that will likely continue to go unpaid, and to allow for a clean financial slate. However, personal bankruptcy and business bankruptcy are not the same things and have different rules and chapters.
Small Business Owners: Chapter 13 vs. Chapter 7 Bankruptcy

For most small business owners, Chapter 7 bankruptcy is a better option. But in some situations, Chapter 13 bankruptcy is the way to go.
How Does a Sole Proprietorship File for Bankruptcy?

A sole proprietorship is a one-owner business (or in some cases, a business owned by a married couple) that has not been incorporated or structured as a limited liability company (LLC). If you have started your own business but haven't created a formal corporate or LLC structure, you have a sole proprietorship.
Will You Have to Close Your Business if You File for Personal Bankruptcy?

You may have to shut your business down if you file for Chapter 7 personal bankruptcy. However, if you own an LLC or corporation with others, you may be able to keep your doors open, even if you are personally liable for a significant portion of its debt.

Listen to the Podcasts on Business Bankruptcy

Small Business Bankruptcy: Part 1

Part one of a two part series on Bankruptcy for Small Business Owners
Small Business Bankruptcy: Part 2

Part two of a two part series on Bankruptcy for Small Business Owners

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