When you’re struggling to pay your bills, filing for bankruptcy can be a good choice. And for business owners who are looking to keep their doors open while still getting help with their total debt, filing for Chapter 11 bankruptcy may help. This form of bankruptcy helps you enter into a repayment plan with your creditors while still keeping your company’s doors open. Unfortunately, this form of bankruptcy doesn’t cover all types of debt. Here’s what your Wisconsin business bankruptcy attorney wants you to know.
The Debts Chapter 11 Bankruptcy Won’t Forgive
Here are the types of debts you’ll still have to repay in full if you file for Chapter 11 bankruptcy in Wisconsin.
Child Support or Alimony Payments
Child support and alimony payments are an agreement between you as an individual and your ex-spouse. If you fall behind on payments because you’ve been contributing personal funds to your business’s operations, that debt becomes a personal responsibility. If you file for bankruptcy, you’ll still have to repay your former spouse what you owe in full. The bankruptcy court won’t discharge the debt or include it in your business bankruptcy payment plan.
Debts You’re Personally Liable For
It’s normal for business owners to personally guarantee debt to fund the business, especially during lean times or when they’re just starting out. Unfortunately, when you personally guarantee a debt, even if it’s business debt, that debt becomes your responsibility, not the business’s. This means it won’t be discharged if you file for Chapter 11 bankruptcy for your business.
Personal Injury Settlement Payments
If someone injured at your business sues and wins, you may be required to make payments to them for their injuries, medical care, and any pain and suffering. If you file for Chapter 11, those payments will likely not be discharged by the bankruptcy court. You’ll have to make them in full according to the terms of the settlement agreement you reached during the lawsuit.
Debts Not Listed in Your Bankruptcy Filing
Chapter 11 bankruptcy only applies to debts that you include in your filing. If you forget a loan, business credit card, or other liability, the court won’t be aware of it and won’t be able to include it in the reorganization of your debt. This is why it’s essential to work with an experienced Wisconsin business bankruptcy attorney. They’ll help you make sure all debts are fully accounted for when you file.
Personal Debts Not Tied to the Business
When you file for Chapter 11 bankruptcy for your business, only your business’s debts are included in the reorganization. If you have personal debts you’re struggling to repay, you’ll need to consider filing for personal bankruptcy if you want those debts discharged. This filing will be separate from your business’s filing.
How to Decide if Chapter 11 Is Right for You
Chapter 11 bankruptcy is a useful tool to help business owners get out of debt. But it’s not the perfect fit for every situation. You may want to consider Chapter 11 if you meet the following:
- You want to keep your business running.
- You’re confident in your ability to repay what you owe.
- You firmly believe in your company’s ability to grow and earn profits over time.
If you think you’ll struggle to repay your debts after working with the bankruptcy court, you may be better off considering a different form of bankruptcy. Speak with your attorney to learn more about your options.
Speak with a Wisconsin Business Bankruptcy Attorney
Though all debt won’t be eliminated by Chapter 11 bankruptcy, this method can still help you get your business back into good financial shape. If you’re interested in learning more about Chapter 11 bankruptcy or want to start your petition, contact us today to schedule a free consultation.
