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Hope for the best; plan for the worst. It's a good life strategy that can be essential for small business owners. While most of us don't want to plan for -- or even consider -- our businesses going bankrupt, it's a sad reality that many startups don't end well. And meeting that end with the right plan can protect you as the small business owner and may even give your business a second chance.
So here are the most important things you need to know about small business bankruptcy, from our archives:
The first thing most of us want to know about bankruptcy is how to avoid it. Considering the social stigma attached and the lasting effect a filing can have on our credit, that's perfectly understandable. So here are three ways you might be able to stave off a small business bankruptcy.
As much as we might want to avoid it, sometimes filing for bankruptcy is the right move for both you and your small business. But how do you know when the time is right? Every small business is different, and may be carrying different kinds of debt, but there are some general principles to consider.
So how does the bankruptcy filing work, logistically speaking? The thought of court filings, attorneys' fees, and even appearances before a judge may sound intimidating, but the process can be pretty straight forward, depending on your corporate structure and which type of bankruptcy you're filing.
Speaking of types, which form of bankruptcy is right for your small business? Chapter 7 generally involves liquidating the business assets and using the revenue to repay debts, which means closing up shop for good. For those more optimistic about their small business's future, Chapter 11 may allow you to reorganize and pay down your debt while keeping your doors open. Both have specific requirements your business will need to meet.
All owners are emotionally tied to their small businesses. But what about your financial ties? In some cases, creditors may be able to target your business for repayment of personal debt.
Every small business is unique -- to determine whether, which type, and how a bankruptcy filing is right for your small business, contact an experienced bankruptcy attorney.