Small Business Owners With Debt In Monmouth County: Is Personal Bankruptcy A Good Option For Recovery?

In this article, you will discover:

• The difference between business and personal bankruptcy for small business owners in New Jersey.
• If filing for bankruptcy halts collections and lawsuits against you or your small business.
• Whether it’s better to close your business before filing for bankruptcy.

What’s The Difference Between Business Bankruptcy And Personal Bankruptcy For Small Business Owners?

It depends on the debt and whether the business owner has personally guaranteed it. If you have debt you didn’t personally guarantee, you could file a business bankruptcy. That would discharge the business’s debts. On the other hand, if you have guaranteed debt, obtained a line of credit for supplies, or signed a lease as a personal guarantor, business bankruptcy will not protect you.

Business bankruptcy won’t protect you from personally guaranteeing a lease, line of credit, or any other debt you personally guaranteed. In those circumstances, you must file a bankruptcy for the business and to protect you from the debts you personally guaranteed for the business. You must also file a personal bankruptcy.

Can I Continue Operating My Small Business After Filing For Personal Bankruptcy?

This depends on your business’ structure. If your business is a sole proprietorship and you’re filing for Chapter 13, then you can continue operating your business. If your business is an LLC or a corporation, you must file some form of Chapter 11 to continue operating the business. If you file a Chapter 7, in most cases, the business must be shut down, and any assets you have must be liquidated to pay any business debt.

It’s unusual to continue a business in Chapter 13 or Chapter 7. However, in Chapter 13, you can continue your business if you are the sole proprietor. If your business is an LLC or a corporation, the only way to continue your business is through filing for Chapter 11 bankruptcy.

Chapter 11 is complicated and expensive. You must have a business plan to demonstrate to the Bankruptcy Court that you can profitably continue the business. You would likely have to repay a portion of the business debt through a Chapter 11 plan.

Attorney Paul Mirabelli is a seasoned lawyer based in Hazlet, NJ, who has helped countless clients just like you navigate the intricacies of bankruptcy law. With decades of experience, he is prepared to assist you with filing for personal or small business bankruptcy and deciding whether it’s in your best interest to continue running your business.

Still have questions? Ready to get started? Contact Paul N. Mirabelli, Esq. today to schedule an initial consultation.

Does Filing Personal Bankruptcy Stop Lawsuits And Collections Tied To Small Business Debts?

If you file an individual bankruptcy and a corporation or LLC also owes the debt, a co-debtor stay applies. Once you get a discharge or the creditor files to get relief from the automatic stay, the creditor can go after the corporation or the LLC.

Personal bankruptcy slows down the collection process for LLC or corporate debt, but it doesn’t completely stop it or protect your business from that debt.

Is It Better To Close My Business Before Filing For Bankruptcy?

Whether it is wiser to close down your business depends on your circumstances, and you will have to perform an analysis to determine the best option for you. If you close down the business, liquidate its assets, and fail to pay the business’s creditors, this will cause problems.

If your business is already closed down and you’re more concerned about individual liability you may have for either corporate or LLC debt, you need to be cautious. You can’t liquidate the company, use the money for something other than paying creditors, and then file a Chapter 7 or personal bankruptcy to protect you from business creditors.

In instances where you liquidate the assets but don’t pay the debts, those are debts that may not be dischargeable in bankruptcy. The creditor can then prove that you committed bankruptcy fraud. It is always best to liquidate business assets and use the amount to pay back your business’ creditors.

How Can Filing Personal Bankruptcy Help Me Reposition Or Rebuild My Business?

As someone filing for bankruptcy as a business owner, your biggest problem is that you went into business and it wasn’t profitable. If you can’t come up with a business plan to make your enterprise profitable in the future, you’re going to run into the same difficulties again.

In such cases, you’re better off filing for corporate bankruptcy. If there are debts you guaranteed, you’ll also have to file for personal bankruptcy. That’s the best way to get a fresh start.

And if you have significant medical or credit card debts as a business owner, Chapter 7 or Chapter 13 can help you get the fresh start you need to give running a business a second chance in the future.

Still Have Questions? Ready To Get Started?

For more information on personal and small business bankruptcy in Monmouth County, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (732) 264-3880 today.