The need to file bankruptcy for business debt may seem unavoidable. However, a business filing bankruptcy is not always the best choice compared to other options. Options that can help turn your business around without the headache that comes with bankruptcy. Before deciding file bankruptcy for your small business, you can pre-qualify yourself by answering a few questions.
Business Bankruptcy Options
- Is your income below the median income level for your state. This is the Chapter 7 income limit. If your income has been below the Chapter 7 bankruptcy income limit and you have no reason to believe it will increase any time soon, your income is qualifying.
- If you do not pass the income requirement to justify Chapter 7, you may still qualify based on essential cost of living expenses. Such expenses would be mortgage payments, food, clothes, medical bills and anything essential to living. Non-essential items such as home furnishings are not considered essential. If, by the end of the second test, your disposable income is below a certain level.
Chapter 7 can work well for small businesses such as sole proprietors, but for corporations or partnerships, Chapter 11 is most likely the better option.
The Chapter 11 Advantage For Larger Businesses
- Under Chapter 11 a business can keep their doors open.
- It allows for partial pay back of unsecured debts.
- It stop harassing calls from creditors by means of an automatic stay judgment.
- Restructured terms on secured debts giving more time to pay them off.
Filing for Business Bankruptcy Conclusion
You can see why we recommend exploring options other than bankruptcy. Like we said in the beginning, there are instances when going bankrupt is unavoidable, but more often than not there is a more suitable route.
The best route you can go is:
- See what options are suitable for your situation.
- Look for reputable companies who offer the suitable programs.
- Call multiple companies and begin narrowing down which one is right for you.
- After enrolling, make sure to stay on top of the new structured agreement.
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