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Key facts about small business bankruptcy

One incident can create a negative wave that sends a business down a financial hole. Thankfully, people and business have options, such as Chapter 7 bankruptcy filing, that aid them in getting back on their feet. 

Small business owners in need of a fresh start may find that this type of bankruptcy is their best option. Before making such an important decision, there are a few key facts to know.

Selecting the right option

There are a few different types of bankruptcy options available for people, depending upon their situation. Each type of bankruptcy has a different process, and therefore reaches various results. For those owners of small businesses who are looking to close the business and start with a clean slate, a Chapter 7 bankruptcy may be the best choice.

Requirements for filing

Under Chapter 7 bankruptcy, parties may file for personal or business bankruptcy. As such, the type of business determines the filing needs for different business owners. Those with limited liability corporations must file both personal and business bankruptcies if they desire to dissolve all relation to the business. On the other hand, business owners with sole proprietorships may file just a personal bankruptcy to cut all ties to the business and eliminate personal debts. 

Advantages to the process

The Chapter 7 bankruptcy allows people to resolve their debt issues within three months. Through the process, the debtor dissolves the company and is able to walk away without any business obligations. The personal bankruptcy removes any additional connections the business owner has to the company. This allows people to start fresh. Whether they choose to begin a new business or start a new career, they have the ability to do so.

It is important that filers make an informed decision. Anyone considering bankruptcy should take some time to review the laws and regulation, and consider consulting with a knowledgeable attorney to determine the best course of action for the particular situation.

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