What happens when you own a business and it has grounded to a halt and you’re deeply in debt?
In today’s economy many people find themselves in this situation. When you started the business you may have signed personally for leases, materials, and business credit cards. Even though the card is in the name of the business, it is most likely guaranteed by the business owner, aka you.
You can first try to sell your account receivables or ask clients who owe you money to pay you now for a discount. You might also try to sell equipment.
Bankruptcy is expensive, painful and should only be considered when all other options have failed or are not reasonable. Consulting with an attorney is the best thing to do. You might have to file a bankruptcy both personally and for the business. Usually business owners file a chapter 7 or a chapter 11. If you decide to shut your doors down, then a 7 is probably better. A trustee will take and sell any un-exempt assets and pay your creditors.
At Ambrose Law Group we look to file a personal bankruptcy first and determine if the business has any assets that creditors can go after. If the client is sued on the business and there are assets worth protecting we may file a bankruptcy on the business then.
If you think your business will survive then a chapter 11 is the best option. You will need to come up with a plan for a reorganization to repay outstanding debts and continue to operate as a business. You may need DIP debtor in possession financing to keep the business afloat while in the bankruptcy. If your in a chapter 11 and cannot obtain the financing, then you may convert to a chapter 7 liquidation.
If you have any questions concerning bankruptcy please contact David Lutz at (248) 624-5500 or by email at David@ambroselawgroup.com