In many areas of the United States, small businesses owners over-extended themselves during the Great Recession hoping that their sales would rebound along with the economy. Unfortunately, this has not been the case for many sole proprietors and small business owners in Ohio. Consumers have struggled to overcome overwhelming credit card debt and have changed their spending habits so that they don’t incur more debt. This has left many local businesses struggling with their own overwhelming debt. Those who can relate all too well to this scenario may want to consider Chapter 7 for businesses.
Similar to personal bankruptcy, businesses that file for Chapter 7 will be appointed a trustee by the court. The trustee will then liquidate all of the businesses assets—including client lists—and use the proceeds to pay creditors. If the debt is greater than the proceeds from the asset sale, the remaining debt is forgiven. Chapter 7 for businesses is usually the least expensive option for over-extended business owners, with fees starting at around $2,000. The business is usually dissolved after this type of bankruptcy, but there are exceptions to the rule. If the trustee is unable to secure buyers for the business assets, the business owner is given to opportunity to repurchase them.
For more information on the specifics of filing Chapter 7 for businesses, sole proprietors or small business owners may want to speak with a bankruptcy attorney. While it is a viable option for many, there may be other means of debt relief that would be more beneficial in certain circumstances.
Source: FOXBusiness.com “A Bankruptcy Guide for Business Owners,” Donna Fuscaldo, August 6, 2013.