Why Chapter 7 Bankruptcy Usually Is Not Ideal for Business Owners
If you are a business owner looking to file for bankruptcy protection, you might be wondering what bankruptcy chapter you should file under.
In most cases, the answer will not be to file for Chapter 7 bankruptcy — unless you’re a certain type of sole proprietor. That’s because filing for Chapter 7 will almost always shut down your business because it does not provide any way of protecting property owned by a legal entity such as an LLC or a corporation. Instead, the bankruptcy trustee will typically sell the company and its assets, use the proceeds to pay off creditors, and officially close the business.
These are some of the other issues that can arise when business owners attempt to file for Chapter 7 bankruptcy:
- Business owners can often find better rates for their companies’ assets than a bankruptcy trustee can.
- If your business entity is a partnership and you file for Chapter 7 bankruptcy, you’re also putting the personal assets of your partner at risk.
- Filing for bankruptcy of any type gives creditors a valid means of airing their grievances and disputes, which could lead to litigation for fraud, partnership disputes or attempts to hold you personally liable for your company’s debts.
It is also important to remember that there are certain types of debts that Virginia does not allow you to discharge in Chapter 7 bankruptcy, which could also affect your decision.
With all this in mind, it’s worth seeking the advice of a Charlottesville bankruptcy attorney at Miller Law Group, P.C. who can help you to proceed in a way that makes sense for your situation. To learn more, contact us online or give us a call at 434-202-5293 today.