Can I erase my business debts with bankruptcy?

The coronavirus pandemic has proved devastating for businesses in many industries. Restaurants and retail stores found themselves forced to shutter their doors or offer curbside service only for months, and even now most businesses are struggling to get back to normal sales. An April survey conducted by the National Federation of Independent Business found that almost half of all businesses could be in danger of failing, with that number increasing from six in ten businesses should the pandemic last until Labor Day. With so much uncertainty surrounding the future and the ongoing spread of the virus, the reality is that many businesses simply will not survive the pandemic. If you are a small business that is failing, you may be wondering what your options are should your business close. Our Beavercreek, Ohio bankruptcy lawyers discuss whether bankruptcy can benefit failing business owners below.

Chapter 11 vs. Chapter 7

Several bankruptcy options exist for business owners who are struggling to survive during the COVID-19 pandemic. Business owners will need to carefully calculate how much debt they are carrying and whether they want to try to stay open through this pandemic and beyond. If your business needs immediate relief from debt, but you want it to remain operational, Chapter 11 may be a viable option for you. With a Chapter 11 bankruptcy, you can reorganize your debt and pay it down over time. A new Chapter 11 bankruptcy subchapter, Subchapter 5, has made the process simpler for businesses with under $7.5 million in debt, but the fees associated with filing for this subchapter can be hefty. As such, you will want to make sure your business is able to survive the pandemic and move towards a strong future.

Chapter 7, on the other hand, will require liquidation of your assets to repay your creditors. Often, both the business and the individual business owner will need to file for bankruptcy. If only the business declares bankruptcy, the owner could still be on the line for debts that were personally guaranteed. Your bankruptcy attorney can closely review your debts and obligations to determine what your best options are to eliminate your debt and move past the closing of your business with a fresh slate.