If you own a small business anywhere in the U.S., your livelihood depends on countless factors ranging from market competitors to economic recessions. Maintaining a business with a steady flow of income and output of products or services is difficult, even with a strong foundation. No matter how old or young your business is, it’s possible to face financial struggles. If you’re having a hard time making debt payments from month-to-month, Behm Law Group, Ltd. can help you decide whether filing for business bankruptcy in Luverne, MN, is the right choice for your business.
Filing for business bankruptcy is a highly effective way to recover from severe debt. When you file for a business bankruptcy, you can choose Chapter 7 and liquidate your assets (shutting down your business in the process), or you can file for Chapter 13 bankruptcy and propose a restructuring of your debts into a manageable repayment plan (allowing your business to continue operating as you repay debts under the supervision of a bankruptcy trustee).
Whichever type of bankruptcy you file for, your trustee will rigorously examine your case for information about your past finances, business format, debts, income, living expenses, and contract agreements with your creditors. This examination determines how your assets will be liquidated and your debts discharged or restructured. Once your trustee has all the necessary information submitted with your petition and you have met all pre-bankruptcy requirements (credit counseling, bankruptcy fees, Means Test, and 341 hearing), the liquidation process will being in a chapter 7 case or you will propose a repayment plan in a chapter 13 case.
Behm attorneys can work with you to draft a repayment plan taking into account all your debts (priority, secured, and unsecured) and determine which debts you are liable to repay in full or have discharged in part from 0%-100%. One concern many business owners have in bankruptcy is whether they’ll be personally liable for the debts their business cannot repay. In the majority of cases, you will be personally responsible to pay debts your business can’t because it’s likely you made a personal guarantee agreement with your creditor when the loan was given.
Personal Guarantee: When you make a business loan agreement, the creditor needs to know they are protected in the event you cannot repay that debt. To resolve this issue, most creditors will not extend loans to businesses without requiring the owner to sign a personal guarantee agreement stating they are responsible as an individual to repay that debt in the event their business can’t meet payments.
Personally Liable: In short, you will be personally liable for your business debt when you file for Chapter 13 bankruptcy if:
- You have a sole proprietorship
- You have a partnership
- You made a personal guarantee on a debt
To learn more about filing for business bankruptcy in Luverne, MN, or to find out about personal guarantees and debt liability, contact Behm Law Group, Ltd. at (507) 387-7200 today.