2 Important Questions to Ask in Filing for Business Bankruptcy
Business bankruptcy is a decision that can affect the different areas of your life. Ask yourself these 5 questions before deciding to file for business bankruptcy.
Question No. 1: What is my business?
The type of business organization determines what bankruptcy options are available for you. These are different types of business organization:
a. Sole proprietor – The sole proprietor is the simplest type of business organization. The business asset of a sole proprietor is included in his personal asset. Once bankruptcy occurs, its effects can affect the personal asset of the owner. They should file for Chapter 13 of the bankruptcy code.
b. Partnership – The business is shared by owners which include the profits and losses. If a partnership company chooses Chapter 7 and all its assets are insufficient to cover their debts, a Trustee can sue the owners.
c. Corporation – the corporation in itself is a separate legal entity from their owners. Once bankruptcy occurs, the personal assets of its owners are not put in a risk. They have to freedom to choose between Chapter 7 (liquidation) or Chapter 11 (reconstruction)
Question No. 2: Why do I need to file business bankruptcy?
This the most important question to answer. Make sure you are doing what is best for the company. Weight the different advantages and disadvantages of filing for bankruptcy. Don’t treat bankruptcy as an easy way out. The effects of bankruptcy can affect you and your shareholders. Ensure that you have exhausted all means possible before filing for a bankruptcy.
