Small Business Bankruptcy Lawyer
Debts accumulated by a firm, regardless of the type of business organization formed, can have a significant impact on the personal finances of its owner(s). Attorney Jason Greene, one of the few Loveland business bankruptcy lawyers, has counseled a number of small business owners in Colorado who have personally guaranteed business debt and are concerned about the future of their company. Many, but not all, of these companies are limited liability companies (LLCs) or limited liability corporations (S-Corps) (with one or a few shareholders). The filing of a chapter 7 or chapter 13 petition in Colorado Bankruptcy Court may give a fresh start for the majority of these people.
Type of Business
The structure of the business entity itself is the first question to ask. Because it is not a separate legal entity, a sole proprietorship cannot file for itself. Instead, the owner will have to declare personal bankruptcy. All assets and debts owed (personal or commercial) must be disclosed in the bankruptcy schedules of the individual business owner, who may choose to file for chapter 7, chapter 11, or chapter 13 bankruptcy (the latter if the total amount of unsecured debt is within certain limits). In Colorado, an individual filing for chapter 7 bankruptcy who has majority business debts is not required to pass the Means Test, regardless of income and expenses.
A C-Corp, S-Corp, or LLC, on the other hand, can declare for bankruptcy under Chapter 7 or Chapter 11. (Chapter 11 concerns are not normally handled by this firm and will be covered just in passing, while Chapter 13 is exclusively open to individuals, not businesses.) The question of whether a corporation should apply for chapter 7 arises, especially if a personal bankruptcy will erase any personal guarantees made for business debt.
When Should a Company File for Chapter 7 Bankruptcy?
A company, unlike an individual, is not entitled to a discharge and the “new start” that chapter 7 usually provides. As a result, we feel that a business should file chapter 7 only if a director or officer is personally accountable for a non-dischargeable liability, such as the trust fund part of an employee’s salary or payroll taxes. The automatic stay provisions will preclude an unsecured creditor from encumbering or levying corporate assets in order to collect a debt for which a director or officer is personally liable. A chapter 7 trustee will be appointed by the Colorado Bankruptcy Court to handle the bankruptcy estate with the purpose of selling business assets and winding up the business in order to pay priority taxes first. Creditor actions against the corporation’s directors or executives should be reduced as a result of the chapter 7 filing. If a small firm is struggling and its debts greatly outweigh its assets, a chapter 7 bankruptcy is the best option. The Law Office of Loomis and Greene will advise you if a chapter 7 business bankruptcy is appropriate or whether it is preferable to simply walk away based on the income and expenses compared to the assets and liabilities of the small business.
Small Business Owners in Chapter 13 Bankruptcy
A chapter 13 bankruptcy is often the best option for an individual debtor who is personally accountable for business debt (regardless of whether the majority of the debt is business related). This is especially true for successful enterprises with valuable assets. A chapter 13 bankruptcy can typically prevent a chapter 7 trustee from liquidating a firm by permitting the debtor to pay any non-exempt equity into the bankruptcy estate for up to 60 months, in addition to the Colorado tools of trade exemption.
If your company is insolvent, call the Law Office of Loomis and Greene at (970) 663-9138 for a free initial consultation. Jason Greene, a Loveland bankruptcy attorney, can thoroughly explain the best options for you and your business.