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Do you have to close your small business if you go into bankruptcy?

On Behalf of | May 19, 2022 | Business Bankruptcy

When you are struggling with the debts you owe for your small business, it can be hard to want to think about bankruptcy. You may only have ever seen small businesses go through bankruptcy when closing, but that’s not necessarily what has to happen to yours.

Bankruptcies can be helpful in restructuring and reorganizing your business, which could help you stay open. For example, you might opt for a Chapter 13 or Chapter 11 bankruptcy to keep your company up and running.

Chapter 11 bankruptcy for small businesses

Chapter 11 bankruptcy may be one option that you have. This is a bankruptcy that gives you the opportunity to reorganize your business and restructure your debts. It does take time to go through all the steps to resolve debts and renegotiate contracts in this kind of bankruptcy, so you will have to set aside additional time and money for it.

Chapter 13 bankruptcy for small businesses

Another option is to go through Chapter 13 bankruptcy. Chapter 13 bankruptcy is somewhat like a consolidation loan, but there is a time limit on your repayments. Usually, you repay what you owe for the next three to five years as you restructure your business.

This kind of bankruptcy may be open to you if you have secured debts of less than $1,184,200 and under $394,725 of unsecured debt. If you’re hoping to restructure your business, this kind of bankruptcy isn’t generally used, but you will be able to stay open in most cases.

What if Chapter 11 or 13 bankruptcies won’t work for you?

Sometimes, Chapter 11 or 13 bankruptcies aren’t going to work for you for one reason or another. In that case, a liquidation bankruptcy may still be available to you. This type of bankruptcy does require you to sell your assets and repay as much of what you owe as possible. It’s also the type of bankruptcy that many businesses use when they’re closing down due to debt.

You have options if you are struggling with debt. One of these bankruptcies may be a good choice, but there could also be other legal options to explore.