If your business is having financial problems, you may want to consider filing for bankruptcy protection. If your business is a sole proprietorship or partnership, your personal liability is higher than if your company is a corporation. In a sole propetorship, you are considered responsible for 100% of the debts of your company. Creditors could go after your personal assets. While in a partnership, you and your partner are each responsible for your respective proportion of debts, you could also be responsible for 100% of the debts, if your partner does not have enough assets to cover your partner’s share of the debt.
If your business is a corporation, corporations are considered separate entries so you are not personally liable for your company’s debts unless you personally guarantee your company’s business loan or collateral securing the loan. Keep in mind also that your initial investment and that of your other shareholders in the company are at risk when your business files for bankruptcy. Similar to a corporation, if your company is a LLC, you may be personally liable if you guarantee a loan or collateral securing a loan
Chapter 7 bankruptcy protection is used when a company no longer wants to stay in business. The company’s assets, including business equipment, are sold to pay off creditors. Chapter 7 relieves your business’s contractual obligations under a lease and gets rid of your business debts.
Chapter 11 bankruptcy protection is used for businesses that wish to continue conducting their business and keep all their assets. Under Chapter 11, your business agrees to enter into a reduced debt reorganization plan with creditors, subject to the Bankruptcy Court’s approval. Basically a Chapter 11 is a reorganization and restructuring of your business. Under the reorganization plan, your company agrees to pay off its debt to its creditors over a 3-5 year period. After the plan has been completed, the bankruptcy is discharged.
Indiana Bankruptcy Attorney
Filing for business bankruptcy is complex. Before you decide to file for bankruptcy of your business, you should discuss the decision with an experienced Indiana bankruptcy attorney. An Indiana bankruptcy attorney can sit down with you and help you choose the best option for your business and your financial situation. The attorney will be able to file the Petition of bankruptcy on your behalf, attend court hearings and negotiate the reorganization plan with your company’s creditors.