Filing for bankruptcy as a small business owner can be confusing and complex. To help sort through the confusion, attorney Catherine Christiansen tries to explain the basics of what is involved. A noted attorney at the Christiansen Law Office in Long Beach, California, Christiansen focuses her practices on bankruptcy law.
Although small businesses can always file for bankruptcy, they may not be eligible for all the options that individuals are when making this type of filing.
For instance, small business owners are not eligible for a Chapter 13 — typically one of the more popular options for individual filing for bankruptcy. The reason they are not eligible for this type of filing is simple: Businesses are not individuals, and only individual persons can file for Chapter 13 protection.
That does not mean, though, that small business owners do not have any options available if they run into trouble. Businesses have the option for filing for Chapter 11 or Chapter 7, depending on the situation, which may be better suited to fit their needs and problems anyway.
For a business that is using Chapter 7 to file for bankruptcy, the filing is usually a basic wind down of the business. By filing for Chapter 7, a business owner is letting his creditor know what his assets are, and letting the trustees know if any assets are left that can be sold.
Businesses interested in filing for a Chapter 11 bankruptcy, meanwhile, have many more hoops to jump through. I say that because Chapter 11 bankruptcies are generally a lot more complicated for most organizations to file for.
People who are self-employed have a slightly different situation. If you have someone who is self-employed attempting to enter into a Chapter 13 bankruptcy, then there is a good chance the attorneys fees required for that are going to be higher than if that person was choosing to go another route.
In addition, most self-employed people filing for bankruptcy through Chapter 13 are required to provide additional documentation above and beyond what other people are required to give. Beyond the typical paperwork required, self-employed people filing for Chapter 13 must provide documentation such as past pay stubs, if possible, to their trustee.
While filing for bankruptcy can often be more tricky or complicated as a small business owner or self-employed individual, it can still be done. For the best chances of coming out on top, though, I always recommend that people find an attorney who specializes in bankruptcy law in their particular area or district.
This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.
