What You Must Know About Small Business Bankruptcy

 Posted on November 02,2023 in Bankruptcy

Bankruptcy can be a scary prospect for any business owner, especially for small businesses. If you are an entrepreneur considering bankruptcy, it is important to understand the different kinds of bankruptcy and how each may affect your business. Depending on what your goals are, there are various avenues you may choose to pursue at this time. To get started in pursuing bankruptcy, contact an experienced lawyer. This crucial first step will ensure you have the guidance necessary to make informed decisions.

Types of Small Business Bankruptcy

In North Carolina, small businesses pursuing bankruptcy usually file under Chapter 7 or Chapter 11 of the bankruptcy code. Chapter 7 involves liquidating the business assets to repay creditors, while Chapter 11 bankruptcy allows the business to reorganize and continue operating while repaying debts over time. Choosing the appropriate bankruptcy chapter depends on the business’s financial situation, goals, and long-term viability.

The Automatic Stay and Debt Discharge

Upon filing for bankruptcy, an automatic stay goes into effect, which halts all collection efforts by creditors. This provides temporary relief for the business and allows for the development of a repayment plan. In Chapter 7 bankruptcy, the business’s debts may be discharged, relieving the company of its obligations. In Chapter 11 bankruptcy, the business proposes a repayment plan to creditors, which, if approved, allows for the restructuring of debts and continued operations.

Effects on Business Operations and Credit

Small business bankruptcy can have significant impacts on operations and credit. During bankruptcy proceedings, the business may need to downsize, sell assets, or restructure operations. Additionally, bankruptcy can negatively affect the business owner’s personal credit, making it challenging to secure future loans or financing. However, bankruptcy also provides an opportunity for a fresh start and the ability to rebuild credit over time.

Seeking Legal Guidance from a Professional

Bankruptcy involving small businesses can be highly complex. As a result, obtaining professional legal guidance is an important step in ensuring the process is followed correctly. Experienced bankruptcy attorneys can assess the business’s financial situation, explore available options, and guide the owner through the entire bankruptcy process.

Contact a Charlotte, NC Small Business Bankruptcy Lawyer

As a small business owner seeking bankruptcy options, it may feel like the entire world is falling upon you. However, understand that you have options, and the world is not going to end. There are legal avenues you can pursue to help salvage your financial situation. Contact the skilled Concord, NC small business bankruptcy attorney with Blossom Law PLLC. Call 704-256-7766 for a free consultation today.