Small businesses need business planning for the future, and that planning needs to include what to do in the event of a bankruptcy.
Filing for a bankruptcy is one of life’s more challenging moments, guaranteed to be a gut-wrenching experience. It’s a tough decision to make when someone’s hopes and dreams have been incorporated into a business. It’s a very personal decision as well and goes to the heart of how a person was striving for success and failed.
While some regard the bankruptcy process as a way to get out of debt, there are things that people don’t know – things in the fine print they need to be well aware of before acting too precipitously. Last year’s small business bankruptcy statistics are a bit on the dismal side, clocking in at a high rate of roughly 65% of small businesses going under. Sure, some of it might have had something to do with the economy, but that is just the tip of the iceberg when it comes to reasons.
The real reason for most of the small business bankruptcies is that the owners came face to face with a major cash crunch. Debts outstripped their income and they had no money to pay off the bills. While this can happen to any business, it hits a small business even harder, as they tend to have more of their personal resources invested in their enterprise.
By the time things have gotten too overwhelming to handle, the owner would have the option to declare Chapter 11 or other applicable chapter suitable for a small business bankruptcy. To do this requires the services of a skilled bankruptcy attorney.
At this point, the attorney and client sit down and discuss what kind of company the owner operates; e.g. if the company a sole proprietorship or not. If it’s a sole owner, s/he doesn’t need to ask for anyone else’s consent to file for bankruptcy. On the other hand, if there is a partnership agreement in place, joint consent is needed to file. In any event, the services of a skilled bankruptcy attorney are crucial in order to file bankruptcy under the proper chapter and in the proper manner.