Is keeping your small business running causing you to fall deeper and deeper into debt? Bankruptcy may provide you with the relief you need. Of course you’ll want to consider the matter carefully. The legal professionals at the Law Office of Davis & Jones, P.C., can help you make the right decision about your debt-laden business.
In Utah, business owners have multiple bankruptcy filing options. If you’re personally liable for your company’s debts, however, filing a Chapter 7 case in your own name — not on behalf of your business — may be the best solution. Here’s how Chapter 7 bankruptcy for small businesses works and why scheduling a free consultation with our Salt Lake City law firm is a smart step to take.
Chapter 7 Bankruptcy for Sole Proprietors
If you’re a sole proprietor, Utah law basically views you and your small business as one and the same. This is to your benefit, as bankruptcy allows you to eliminate both your personal debts and your personal liability for business debts. If the business debt is more than half of your total debt, you won’t have to worry about the income requirements
of the Chapter 7 means test.
You can also use the Utah bankruptcy exemptions to protect personal and business assets. Therefore, if you’re a personal trainer, handyman, accountant or own any other type of service-oriented business with little costly equipment and supplies, you may be able to continue operating after wiping out your debts with Chapter 7 bankruptcy.
Chapter 7 Bankruptcy for Partnerships
A partnership can file for Chapter 7 bankruptcy, but with this type of claim, no debts are discharged. Instead the trustee closes the business and liquidates the assets to pay off the creditors. If there isn’t enough to cover every debt owed, the personal assets of each partner could be at risk of seizure.
For that reason, this type of bankruptcy for small businesses isn’t often recommended for partnerships. But, Chapter 7 can be a good solution for the individual partners. Each can file a case in their own name after the company closes and, by doing so, erase both their personal and business debts.
Chapter 7 Bankruptcy for Corporations and LLCs
For a Utah business that’s a corporation or limited liability company (LLC), filing for Chapter 7 won’t result in a discharge of any debts. However, it can streamline the closure of the company, and facilitate the orderly sale of assets by the trustee. The transparency of the liquidation can also help discourage creditor claims of fraud.
Anyone who has signed a personal guarantee for business debts will still be obligated to pay them – but, filing a Chapter 7 bankruptcy case as an individual after the business shuts down can help solve this problem.
Talk with an Experienced Bankruptcy Attorney
Bankruptcy for small businesses can be quite complicated. The legal form of your business isn’t the only important consideration when it comes to filing a case. Before deciding to move forward with a personal or business Chapter 7 bankruptcy, you’ll want to understand all of your debt relief options.
The team of attorneys at the Law Office of Davis & Jones, P.C., has decades of experience in bankruptcy law. We can review your situation and explain how to best protect your rights and interests. Contact us for a free consultation to discuss bankruptcy for small businesses today.