Starting your own business can be an exciting venture. Unfortunately, not every small business succeeds and many owners become unable to pay back business loans, keep up with their commercial leases, or honor their contracts. If business debt becomes too much, filing for bankruptcy may be the most responsible choice.
There are different options for business bankruptcy, including Chapter 71 and Chapter 11. A major factor in determining the right type of bankruptcy case is the type and size of business that you have. If you have not incorporated your business or chosen another formal entity and you run your business alone, your business is considered to be a sole proprietorship.2 Bankruptcy cases involving sole proprietorships are different than other business bankruptcy cases in numerous ways.
Sole proprietorships are not considered to be separate legal entities from their owners. Therefore, all liabilities and debts of the business are considered to be the owner’s personal debts. For this reason, sole proprietors whose businesses are in financial trouble can often resolve the issue by filing for personal bankruptcy.
Filing for Chapter 7 Bankruptcy
Sole proprietors often benefit from filing for Chapter 7 bankruptcy. By doing so, you can seek a discharge of your business debts as well as your own personal debts. This can include:
- Unsecured loans
- Unpaid rent and utilities
- Credit card debt
- Legal judgments
- Unpaid contract obligations
Though Chapter 7 can discharge many of your business debts, sole proprietors must all carefully consider the nature of their income and business assets before filing. Just as business debts are considered to be personal, so are the assets of the business, which can include equipment, accounts receivable, tools, and more. These assets will all be vulnerable to liquidation in a Chapter 7 case. In addition, your business income will be put through as your own, which may make calculations for the means test more complex and it may be more difficult to qualify for Chapter 7.
Contact a Salt Lake City Bankruptcy Lawyer for Help Today
While there may be some complications, Chapter 7 bankruptcy has helped many small business owners in Utah resolve their debts and start fresh. If you would like to learn about debt relief options, our experienced bankruptcy attorneys at JLT Law are here to help. Please call (801) 896-9444 for a free consultation today.