Small businesses are struggling all over Ohio. And many owners are starting to ask questions about their options and considering whether they should file for bankruptcy?
They are wondering if bankruptcy can help their small business survive or will it harm their business in the long run?
– These questions are best answered with the help of an experienced Ohio bankruptcy attorney.
If you are a business owner, it is in your best interest to contact Adrienne Hines at Kademenos, Wisehart, Hines, Dolyk & Wright Co. LPA. Attorney Hines will review your situation and advise you of the best steps moving forward.
Reduced income, job loss, credit card debt, and divorce are all contributing factors as to why some people and businesses file for bankruptcy. This federal program provides a legal, financial reprieve for people who have been overwhelmed by unexpected circumstances, and it intends to give these people a fresh start.
All bankruptcy filings are handled in federal court under the U.S. Bankruptcy Code, so it does not matter where a person moves in the United States – the freedom afforded by bankruptcy will follow.
Small Business Bankruptcy
Small business bankruptcy is treated similarly to individual bankruptcy, with two options: Chapter 7 or Chapter 13.
To file bankruptcy, you are subject to a means test. This is where the bankruptcy court looks at your average income for the six months prior to filing and compare it to the median income for Ohio. The court uses this information to determine if you are eligible for Chapter 7 bankruptcy, or if should file for Chapter 13 bankruptcy.
However, if your debts are primarily business-related, you will be exempt from the means test.
Chapter 7: Liquidation
A small business owner can file for Chapter 7 bankruptcy individually, or for their business. It may be more beneficial for the business owner to file individually, but an attorney can examine the situation and let the applicant know what is best for them.
With a Chapter 7 bankruptcy, the courts appoint a trustee to oversee the sale of your eligible assets to creditors and discharge the eligible debt.
Chapter 7 Pros:
- An automatic stay keeps creditors from taking action against you or your business until the bankruptcy is completed (in most cases).
- Certain assets may be exempt from sale.
- Business debts cannot be discharged like personal debts.
- Valuable business assets (non-exempt property) may be liquidated and sold off by the Chapter 7 trustee. This could keep the applicant from continuing to run the business.
- The Chapter 7 trustee may take personal assets to pay off business debt.
Chapter 13: Reorganization
Sole proprietors are the only small businesses allowed to file Chapter 13 bankruptcy. Separate legal entities such as LLCs, partnerships, or corporations cannot file for this type of bankruptcy.
Once you filed for Chapter 13 bankruptcy, a trustee is appointed to organize a repayment plan for your debts. You will get to keep personal property and business assets.
Chapter 13 Pros:
- An automatic stay prevents creditors from taking action against you.
- Small businesses can keep its assets, and keep the business running while debts are “reorganized.”
- The applicant has more time to pay debts.
- Any personal debts not secured by collateral may be discharged at the completion of the repayment plan.
Chapter 13 Cons:
- This bankruptcy process takes much longer.
- The business is responsible for paying debts through a repayment plan for three to five years.
- Secured debts typically must be paid in full, even past the year repayment plan.
- Any discharges only wipe out personal responsibility for the debt, not the small business’s responsibility. The repayment may be burdensome and put the small business out of business.
Speak to an Experienced Ohio Bankruptcy Lawyer Today
Adrienne Hines of Kademenos, Wisehart, Hines, Dolyk & Wright Co. LPA, has been helping families and businesses affected by overwhelming debt for nearly two decades. Bankruptcy may be a solution right now if you are being harassed by debt collectors or wage garnishments, or simply need more time to pay your bills.
To find out if small business bankruptcy is the right choice for you, please call us today. When we take your case, we never leave you to fend for yourself – we stand by you every step of the way.