When your business isn’t performing the way you know it should and you’re behind on bills or racking up debt at a fast rate, filing for bankruptcy can seem like the best choice. While it could impact your business’s ability to continue operating, it can give you a fresh start financially. But there’s a catch. Some of your business debts may not be cleared by filing for bankruptcy. Your Milwaukee business bankruptcy lawyers explain.
It Depends on the Type of Bankruptcy You File
There are several types of bankruptcy that businesses may be able to file, and the type you choose could influence the way your debts are cleared. Here’s a quick breakdown of your options:
- Chapter 7: Chapter 7 bankruptcy is one of the most common methods for both individuals and business owners. This form of bankruptcy can typically clear debts like credit card balances, debts to business partners and vendors, business property loans for cars, buildings, and equipment, and other similar debts. If you have specific debts that you want to clear, speak with a Milwaukee business bankruptcy attorney to see if Chapter 7 will help you clear that debt.
- Chapter 11: Chapter 11 bankruptcy lets you restructure your business and makes it possible to keep the business running while you file. But this method typically does not discharge or clear your debts. Instead, it gives you the opportunity to repay debts over time, often with the profits earned by your business. This type of bankruptcy has its pros and cons, so speak with an attorney before pursuing it. You may find that though Chapter 11 bankruptcy doesn’t discharge debt, it may be a better choice for your business.
- Chapter 128: In Wisconsin, business owners may be eligible to file for Chapter 128, which is a bankruptcy alternative. With this method, you’re able to create a payment plan to pay off what you owe over time. This means you’ll need to continue making payments and your debts won’t be cleared by filing. But it does let you keep your business running and may help preserve your professional reputation.
As with any bankruptcy, you’ll want to speak with an attorney before you commit to a specific method. They’ll be able to help you figure out which option is right for your needs and which will benefit your business most in the long run.
Business Debts You’re Personally Liable For Won’t Clear
Though filing for Chapter 7 bankruptcy may discharge most of your business’s debts, it likely won’t discharge all of them. For example, if you have debts that you’re personally liable for, those debts will still be your responsibility to repay even if you file for bankruptcy and close your business’s doors. Some lenders may require personal guarantees for loans if they’re worried that the business won’t be able to repay the loan in full.
If you’ve signed a guarantee for a debt for your business, you’re still required to pay what you owe to the lender even if you file for Chapter 7 business bankruptcy. If you file for personal bankruptcy at the same time, you may be able to clear those guaranteed debts.
Speak with your lender to determine if any of your loans are personally guaranteed. They’ll be able to provide you with more information so you can make an informed decision.
Speak With an Attorney
If your business is struggling and you’re considering filing for bankruptcy, don’t try to navigate the process on your own. Instead, work with an experienced Milwaukee business bankruptcy attorney and let them guide you through the process.
At Kerkman and Dunn, we know that filing for business bankruptcy can be stressful. Our team is here to help you figure out the best option for your business. Contact us today to schedule a consultation.
