How Denver Debt Settlement Lawyers Can Help You
Small businesses in the Denver area have struggled in the past few months, thanks to the hard hit coronavirus delivered, prompting city “shutdowns” that required non-essential businesses to temporarily close their doors.
Several years down the road, we’ll look back on this time period and sigh, remembering how we all had to change our ways of doing things as we learned more than we could ever have imagined. One of the big lessons many small-business owners are learning is about bankruptcy. At Wink & Wink, we are debt settlement experts, ready to share our insight into how small business bankruptcy works.
Small Business Bankruptcy Process
Only you can determine when you think it’s time to start looking into filing for bankruptcy. Careful consideration is a must before embarking on the process. When you decide to proceed, getting started is the only truly simple part of it.
If you are a sole proprietor, you can file for bankruptcy on your own, if you feel brave enough and knowledgeable enough to do so — although we generally advise against it so you can ensure you’re not losing out on anything you deserve. Other legal types of businesses must work with a business bankruptcy lawyer. The filing process can be lengthy, and having a professional to complete much of the work for you will save you time and frustration. Let’s take a very basic look at the bankruptcy process.
Ultimately, the first step in filing for bankruptcy is choosing the type of business bankruptcy to file. There are three types of small business bankruptcy. Chapter 13 is reserved for sole proprietors with only a small amount of debt and allows the business to remain in operation. Chapter 11 is best if you’d like to remain in business, but intend to reorganize. And business bankruptcy Chapter 7 is the best choice if you need to close down your business because you can no longer afford to remain in operation.
Step two is to file an official petition in the jurisdiction where your business is located. At this time, you will need to pay a filing fee to get your case to the courts.
Next, you will need to complete business bankruptcy forms. Each bankruptcy type has its own set of forms. You will need to disclose a payment plan with the bankruptcy court to explain how you can pay down your debts if you intend to file for a reorganization bankruptcy. Remember that these documents are considered public record, and anyone can look them up. Once all the forms are filed, you will need to attend your federal court date.
A Deeper Look into the Types of Bankruptcy for Businesses
If you’re filing for Chapter 11 bankruptcy or Chapter 13 bankruptcy, you will need to work with your creditors to gain their stamp of approval on your reorganization. A confirmation hearing puts your plan for reorganization up for discussion, where it can either be confirmed or rejected. If approved, you’ll have to submit ongoing financial information to make sure you’re complying with the plan you created and proposed.
Chapter 13 can be filed for by sole proprietorships who would like to stay in business. The amount of debt you can be ordered to repay depends on how much you earn, the property you own, and how much debt you have. If your personal assets are intermingled with your business ones (as they are in a sole proprietorship), you could avoid losing your house and other exempt property you own. A bankruptcy lawyer can help you determine if you qualify for this form of bankruptcy.
Chapter 11 bankruptcy is best for your business if you would like to remain in operation. This form of bankruptcy is reserved for partnerships and corporations, or for sole proprietorships with income levels too high to qualify for Chapter 13. Chapter 11 allows you to reorganize and continue business under a court-appointed trustee, after which you’ll need to make payments to your creditors. This form of bankruptcy is complex and needs an experienced person to lead the way to success.
If you’ve chosen to file for Chapter 7 business bankruptcy, you will be appointed a trustee to take possession of your company’s assets, sell them off, and pay back your debts. When the bankruptcy process is completed, your business will be officially dissolved. This is an ideal choice if you don’t believe our business could continue on in any capacity, like when your debts are too overwhelming for your sole proprietorship, partnership, or corporation. Upon discharge, your business will no longer be obligated to repay your debt. However, partnerships and corporations cannot receive a discharge. And if your corporation or LLC files for Chapter 7 bankruptcy, you may still be personally liable for some of the business debts.
How Long Does it Take to Complete the Bankruptcy Process?
The act of submitting your paperwork to court is relatively quick, especially if you can get your finances in order and are working with a debt relief attorney. However, the entire process can be time-consuming.
Depending on the type of bankruptcy you file, it can take between four months to more than a year to settle in court.
You should also consider the amount of time you have to pay back any debt you’re left with — up to five years, depending on your agreement.
What Should I Be Aware of Before Filing for Bankruptcy in Colorado?
Entering into bankruptcy doesn’t dismiss all of your debts. If you have personally guaranteed any of your business’s debts, such as with your landlord, bank, or corporate credit card, you are still on the hook for those obligations. This is why a personal debt relief strategy is so important; the bankruptcy lawyers at Wink & Wink can help you find ways to reallocate business assets to pay for the remaining non-dischargeable debts, like payroll taxes and sales taxes.
Filing for bankruptcy as a small-business owner requires planning and a great amount of legal knowledge to get through to the other side in reasonably good condition. Seeking legal representation from Wink & Wink is one of the best choices you can make when it comes to bankruptcy.