Many people in and around Tyler wind up looking at bankruptcy as a means of debt relief.
While oftentimes this is because of a job loss, a medical emergency or another sort of financial crisis, in many other cases, it is because a Texan decided to try her hand at a small business, and the risk did not pay off.
No one should feel badly about this, as many small businesses wind up failing. In other words, it takes a lot of effort, and a little luck, to get a business off the ground. Even the greatest business people throughout history have had to try several times before succeeding.
Legal options for failing businesses
It is hard for a Tyler resident to admit that his business venture has failed, but it may be some comfort to know that there are many legal options available.
While another option is a Chapter 11 bankruptcy, these are frequently too expensive to be affordable, and in many cases, they are unnecessary and even unhelpful.
Fortunately, some business owners may be able to take advantage of a Chapter 7 or Chapter 13 bankruptcy, both of which are commonly used by individuals who are in debt.
Whether these are viable options will depend on the person’s individual circumstances including how much debt she owes and how she has organized her business.
A Chapter 7 bankruptcy, in which the debtor simply liquidates its non-exempt assets, is available to all types of businesses. However, only individuals can actually receive a discharge of their debts, that is, legal protection from their creditors.
Many corporations may find it simpler just to dissolve outside of the bankruptcy process.
However, individual business owners are frequently personally responsible for business-related debts.
Someone in a sole proprietorship or general partnership, for example, is responsible for business debt even if it means having to empty out their own bank accounts or sell their other assets like a house or car.
Even owners who have incorporated will likely have to sign agreements with their business creditors which say that if the business fails, they will personally pay the debt.
In the event of a business failure, a Chapter 7 can at least preserve some of the owner’s assets and give him a chance to try again.
Particularly with respect to sole proprietorship, a Chapter 13 can also be a viable option. As long as the person can show she has a regular source of income, including from the business if it still is producing revenue, then she can submit a repayment plan to the court. This repayment plan can include both business debts and personal obligations.
If the plan gets approved, the business owner will be able to make regular payments on outstanding debts. At the end of the plan, any remaining balances are discharged. A Chapter 13 can help a business which is struggling, but still has some prospects, get back on its feet.