Business DebtThe great state of Georgia is home to many equally great small and medium-sized businesses.  Georgian residents are true entrepreneurs and several of our friends and neighbors have enjoyed great success with their businesses all across the state.  Unfortunately, in the business world not every person with a good idea and dedication is going to succeed, especially in the recent hard economic times the country has been experiencing for several years.

Due to the recession, a number of Georgian business owners have made the difficult decision to close up shop and cut their losses.  Along with these difficulties, financial hardships can arise when a person closes his/her business – especially if the business owes a significant amount of money to creditors.  In these situations, creditors often try to threaten to file a lawsuit against the business’s owner personally in order to try to collect payments owed to them by the distressed business.

Whether or not a creditor can collect payments owed to it by your business depends on whether you, as an individual, personally guaranteed any payments, and also depends on how you organized your business (corporation, sole proprietorship, Limited Liability Corporation, etc.)  Another factor in determining whether you are liable to your business’s creditors is whether or not you decide to file bankruptcy.

Filing Bankruptcy for You and/or Your Business

If your business is failing (or has already failed) and you have significantly more debt than assets, you may want to consider filing for bankruptcy.  As a business owner, you may have the choice of filing for Chapter 13 or Chapter 7 bankruptcy – but bear in mind that each type of bankruptcy has its own requirements that must be met and that not everyone qualifies for both types of bankruptcies.  Additionally, not all types of businesses are well-suited for bankruptcy because not all types of business owners are protected from personal liability during the bankruptcy process.  (However, certain types of business organizations, such as sole proprietorships, may be ideally suited for bankruptcy).

Chapter 13 bankruptcies are better suited for situations where the person/business is significantly behind on making payments to creditors, but can still do so provided a new repayment schedule and structure may be agreed upon amongst the parties.  To accomplish this, the person filing the bankruptcy (called the debtor) works with the bankruptcy court to come up with an acceptable repayment plan.

Chapter 7 bankruptcies are appropriate when the person or business’s assets can in no way cover the debts owed, even with the installation of a more forgiving repayment plan.  However, the big down side to Chapter 7 bankruptcy for many people is that the bankruptcy court can sell off your assets and your property, such as your house, in order to pay your creditors as much of the amounts owed to them as possible.  (Certain types of property are exempt from the bankruptcy process though, and therefore will not be sold to satisfy any debts.)

How Do I Know Which Bankruptcy is Best for Me?

There are a multitude of factors that must be considered when deciding (a) whether to file for bankruptcy at all and (b) which bankruptcy to file for.  For a business owner, who may be facing mounting personal and business debts, there may be even more issues present in any given case that must be accorded due weight and consideration before coming to an appropriate decision.

Importantly, especially in the context of small businesses, the repercussions of filing for bankruptcy are not easily taken back or reversed – and on a personal level, the consequences of bankruptcy may be long lasting and drastically affect your financial options in the future.  Therefore, it is highly recommended that interested Georgians contact a skilled bankruptcy attorney to discuss these issues before proceeding.

Contact our office today to speak to an attorney who can explain these issues to you and assist you with your case.