What do you do when it becomes evident that your small business is failing? There are several reasons a business may fail, but some may be beyond your control. However, if your business is failing and your personal assets are at risk, then it may be time to shut down.
Shutting down a business can be a tough decision. During this process, you must honor creditors’ legal rights and lower the damage to your employees. Luckily, you can get rid of most of your business liability and personal debts associated with the business you are shutting down.
By filing Chapter 7, which is also called “liquidation bankruptcy,” you will ask the court to clear your debts, and in return, it will sell some of your assets and use the money to settle your bills.
Other benefits of filing for bankruptcy include the following:
Creditors get paid fairly
Bankruptcy allows creditors to be paid back based on the assets available for liquidation. Therefore, all your creditors have a chance for some compensation according to the priority set by the bankruptcy trustee.
Collection actions are halted
Filling for bankruptcy will stop any legal claims and actions made against you by creditors. For example, if a creditor is suing you for unpaid invoices, bankruptcy will halt all collection actions. In addition, debt collectors are prohibited from contacting you once you’ve filed your petition with the courts.
Filing for bankruptcy can give you a fresh start
If your business is not likely to improve, you may consider closing and filing for bankruptcy. When you file a Chapter 7 business bankruptcy, your creditors will get a portion of their money while you are relieved of your debt obligations.