If your business is in the red, you may think like there is no way out. Declaring bankruptcy may feel like giving up. Many Ohio business owners do not realize that filing for bankruptcy could actually help you turn things around.
One of the biggest benefits that filing for bankruptcy gives you is time. As soon as your business files for bankruptcy, an automatic stay goes into effect. This means that your creditors must immediately stop all efforts to collect debts. The automatic stay can be a huge relief to business owners. It protects you from further harassment by debt collectors and gives you breathing room while you explore your options.
Depending on which type of bankruptcy you choose to file, you may be able to wipe our certain debts and/or keep your business going by creating a repayment plan for your debts. There are three main types of bankruptcy for businesses: Chapter 7, Chapter, 11, and Chapter 13. Each type comes with advantages and disadvantages.
Through Chapter 7 bankruptcy, or liquidation bankruptcy, you can sell or liquidate certain assets to repay obligations. At the end of this process, certain debts can be wiped out. Bankruptcy generally can wipe out unsecured debt, like credit card debt.
Chapter 11 bankruptcy allows a business to continue under a reorganization plan. By reorganizing, your business can figure out a way to pay creditors back over time. Chapter 11 bankruptcy typically applies to corporations, partnerships, and sole proprietorship.
Finally, Chapter 13 bankruptcy allows you to come up with a repayment plan. Unlike with Chapter 7 bankruptcy, you will not have to sell property to pay off your debt. Rather, you will need to repay your debts over some period of time. Chapter 13 bankruptcy makes it more likely to satisfy your debts while you continue to operate your business.
Remember, although bankruptcy comes with advantages, you should not make this decision lightly. As a business owner, you must weigh the pros and cons carefully. Bankruptcy is not the right option for every business. To learn more, speak with an experienced bankruptcy attorney.