Bankruptcy For Small Business Owners
We provide legal assistance to businesses in Connecticut who are considering bankruptcy. If you own a business and are facing legal action because of your debts, read on to see how our law office will help you get back on track.
Options When Businesses Get In Debt
When a small business fails, it may have a variety of different debts, including tax debt owed to federal and state governments. Often the business owner is also liable for these debts. It is not uncommon for a bank or other lending institution to make these individuals sign as guarantors for repaying the debt.
Making sure these debts are handled properly is very important. At The Law Offices of Ronald I. Chorches, our lawyers have years of experience representing businesses and individuals throughout Connecticut in bankruptcy matters. Even if you want to save the business, you should talk to us about your debt relief options.
Eliminating Business Debts Through Bankruptcy
The following breaks down the different bankruptcy options available to businesses:
- Chapter 11 bankruptcy, is where a business still operates but files a reorganization plan that has to be approved by the creditors
- Chapter 13 bankruptcy, can be used for businesses under a sole proprietorship where a repayment plan is filed and major assets can be saved
- Chapter 7 bankruptcy, is commonly referred to as liquidation and is best when restructuring is not feasible and there are no major assets
With all 3 chapters, you will have to attend the 341 meeting of the creditors which is a brief hearing as to the authenticity of the information you files regarding your particular case.
As your attorneys, we discuss your situation to help you decide which makes the most sense for you, whether it is bankruptcy or a negotiated settlement.
We can help you take care of the following kinds of business debts:
- Unpaid Federal Unemployment Taxes (FUTA)
- Unpaid State Unemployment Taxes (SUTA)
- Unpaid Social Security and Medicare withholding (FICA)
- Small business loans and other unsecured debts
The Advantages Of Bankruptcy For Small Business Debt
If you are a sole proprietor, lenders probably asked you to co-sign on business loans to guarantee their repayment. In these situations, you are personally responsible for all your business debts, and all your unprotected assets are vulnerable. You may face lawsuits from creditors as well as potential garnishments, levies and seizures by the government.
Bankruptcy can help you protect your assets, stop collection attempts and end creditor harassment. The automatic stay goes into effect immediately upon filing bankruptcy, and creditors must stop pursuing recovery at that time.
We can help you liquidate your business or reorganize your debts to give you and your business a fresh start.
When small businesses have financial problems, often the owners have similar financial problems as they have co-signed and guaranteed business debts. This is a typical case that we have seen since 2008 when businesses faced considerable challenges from a deteriorating economy.
We have dealt with this scenario many times, and we can successfully protect you personally from your business creditors. We have vast experience in guiding you through this difficult and complex process.
There are many thriving businesses in Hartford, CT., however, some businesses go awry, and things may get to the point of the business owners considering business or commercial bankruptcy. When that happens, the business owners should ask some key questions and discuss the answers with other stakeholders in order to determine if bankruptcy is the right path.
Why do businesses get to the point of considering bankruptcy?
Businesses get to that point for many reasons. Of course, one is that the business may have been mismanaged. Another common one is simply having taken on too many financial obligations. For example, opening lines of credit to fund inventory that then did not sell completely. That can happen if popularity of what the business sells was misjudged, or if a competitor sold comparable items that more people wanted.
What is a good reason to avoid bankruptcy?
If the business is not viable and your personal assets are not at risk, you may just want to end the business without pursuing bankruptcy. However, if your personal assets are at risk, bankruptcy can be a way to shield your personal assets from creditors of the business.
What if I have a limited-liability company (an LLC)?
Many small business owners set up their company as an LLC specifically to protect their personal money and possessions from being lost if the business goes awry. However, your personal money and possessions may still be at risk even with an LLC, which would make bankruptcy worth considering.
If a court finds excessive overlap between your personal finances and the business’ finances, your assets could be at risk. It is also true if you made a personal guarantee to the lender that provided the financing to start the business with.
What To Look Out For Before Your Business Fails
As the owner of a company, you’re hoping to put bankruptcy off and stay afloat. Before deciding that it’s actually in your best interests to declare bankruptcy, there are a few things you may try, options other owners just like yourself often turn to as they search for answers.
First of all, you may grow cautious. When you started your company, you knew that risks were needed and you embraced them. Now you’ll be ultra careful as you try to limit mistakes and losses.
You may also start to lose some of your best workers. They’ll know that things aren’t going well; they may have inside information about funding, or they may just have a gut feeling. They’ll start seeking other jobs. You may enjoy the reduction in expenses at first, but these were your best workers, and losing them hurts.
In addition, you may stop hiring new workers. Even as your best employees quit, you’ll hope that the reduction in payroll can save the company.
You may also try to reorganize. This is often just a fancy way of saying you’ll combine jobs to save money and see if one employee can do the same job that two were previously doing. You know there’s a risk of sub-par results and burnout, but you need to save money.
In the end, you may wind up considering bankruptcy to see if it can give you the fresh start you’ve been looking for. Remember, many other business owners have been in your position too, so just focus on looking into and understanding all of the legal options you have.
Get In Touch With Us
For a free bankruptcy consultation on how we can help you make the best bankruptcy decision for your small business, please contact us online, or call The Law Offices of Ronald I. Chorches at 860-563-3955. We have offices in Wethersfield and Winsted, and are easily reachable from the cities of Hartford, West Hartford, East Hartford and Manchester.