When your small business is struggling financially and you’re a sole proprietor, you need to start looking into solutions as quickly as you can. While bankruptcy might not be the first thing you try, it is a possible solution if you are still bringing in profits but are overwhelmed by the debt your business is carrying right now.
Sometimes, businesses expand too quickly or the economy takes a dive and negatively impacts their earnings. As a small business owner who has only opened as a sole proprietor, it can be hard to make it through multiple bad quarters without fearing the loss of your personal assets. You do have real concerns that need to be addressed as you see the debts add up.
Business bankruptcy could be right for you
A Chapter 13 business bankruptcy could be a good choice if you’re hoping to stay open and want to retain as many of your employees as possible. This kind of bankruptcy is interest-free, meaning that you won’t have to pay extra for seeking this support option. Additionally, since you’re a sole proprietor, this kind of bankruptcy helps you protect your personal assets as well as your business assets.
With a Chapter 13 bankruptcy, you pay down your debt over the next three to five years. You may be granted a lower monthly payment and, once you’ve paid for long enough, have remaining debts discharged.
As a business that is still bringing in money, though it may be less than usual, this could give you the opportunity to get back in control of the debt you’ve accrued and to take steps to reorganize or restructure your business in a way that will help you stay open and become profitable again.
Sole proprietors are in a tough situation
As a sole proprietor, you don’t have all the same protections as an LLC or other type of business. It’s important to discuss your options as soon as you can, because your business debts could begin to negatively impact your personal income as well. If you can’t pay back those debts, you could be held personally responsible unless you take action to address the problem through an option like bankruptcy.