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If your business, big or small, is struggling to pay its bills, bankruptcy help. Bankruptcy does not mean the business is closing, although you can do that, it usually means the business is going to use its legal rights to force creditors to alter the credit agreements so the business can survive. BAnkruptcy can force creditors to lower interest rates, eliminate debts, get rid of unwanted leases or stop foreclosure or repossession of business property. Whether bankruptcy can help depends on the facts, including:
the legal form of your business -- for example, is your business a sole proprietorship, general partnership, corporation, or limited liability company?
whether you are personally liable for business debts
whether you want to close your business or keep it running, and
how much and what types of debts you have.
Chapter 7 Closes Most (But Not All) Small Businesses
If you’re a sole proprietor looking for a strategy to reopen after shelter-in-place orders lift, or if you’re planning to close a company permanently, filing for Chapter 7 can help a business. But only in a few specific situations.
Because of pitfalls inherent in a Chapter 7 business filing, like a business doesn't get a discharge, most business owners choose to shut down a business outside of bankruptcy and to file an individual Chapter 7 (if necessary) to wipe out personal liability for business debt, instead.
Chapter 11 Keeps Small Businesses Open
Chapter 11 bankruptcy is the chapter intended to help businesses reorganize debt and stay in business. Historically, it has been expensive to do for mostbusinesses. But that’s changed. Under Chapter 11, Subdivision V, the new chapter for small businesses, the process looks and feels more like a Chapter 13 bankruptcy, making it a more user-friendly, cost-effective option.