Small businesses have a lot of competition out there, and that can make it hard to stay afloat. However, if your business runs into financial trouble, you don't necessarily have to shutter the doors and give up on your dream. Bankruptcy may be a solution that will allow you to get a fresh start and eventually get back on your feet.
Filing bankruptcy for your business isn't an undertaking you want to do on your own. There are three types of bankruptcies you may be able to file -- but what's right for your needs will differ depending on your business structure and goals.
Here are the bankruptcy options you have to consider:
If you believe that your business can thrive once it goes through reorganization (and you still want to pursue the dream you had for that business), this is probably the best route to take.
A Chapter 11 allows you to make a workable plan to repay your creditors (in part or whole) over time and get your business back on its feet. This is an especially good choice if temporary downturns in the market have set you behind but the pendulum seems to have swung back -- making your enterprise profitable again.
If you really feel that the business has no future and you're ready to move on, Chapter 7 is the route you may want to go. It's the kind of bankruptcy that usually requires you to liquidate your business assets (if you have any) and dissolve the business altogether. Sometimes, that really is the road to a fresh start -- especially if you're a craftsman who has been working as a sole proprietor.
This type of bankruptcy is typically only used for consumers, but some sole proprietors can also benefit from it. Like a Chapter 11, you work out a repayment plan that allows you to whittle down your debts over time -- and even have some forgiven after a period of years.
Bankruptcy is a big decision to make -- but you don't have to sort it out on your own. Talk to an experienced professional about your options before you make your final decision.