Many business owners sink their personal funds into a company and take on significant personal debt or guarantee their business debts. They don't know where to turn when things start to fall apart, and they are unable to repay loans or other debts. If your business is organized as a sole proprietorship, or you personally guaranteed repayment on its debts, creditors may threaten legal action against you. Under these circumstances, it may be wise to consider making a “strategy” appointment with our office in order to map-out your best course of action. If you are an Alabama business owner and are contemplating bankruptcy, you should seek the advice of an experienced bankruptcy attorney at Grainger Legal Services. Legal guidance is critical in navigating this complex process.Protecting Your Personal Finances After Your Business Fails
When you have no money in your business bank account and many debts for which you are personally liable, you may be considering bankruptcy. In most instances, you can keep your house, car, or any other property, while getting some relief. In Chapter 7, there are limits on how much property you can keep known as “exempt” property. In a Chapter 13 payment plan, you keep all of your property but must at least pay your creditors for the amount you went over your limits for Chapter 7. Bankruptcy laws were designed to allow debtors to keep basic necessities like clothing and furniture when getting a fresh start after discharge. Sole proprietors can file for either Chapter 7 or Chapter 13 bankruptcy. As a corporate shareholder or an LLC owner who has personally guaranteed a loan or pledged collateral, you can also file for Chapter 7 or Chapter 13.
Chapter 7 bankruptcy will result in nonexempt assets being sold to pay off creditors. In Alabama, you must use the state's exemptions if you file for bankruptcy because Alabama has opted out of federal bankruptcy exemptions. This means you can exempt up to $5,000 in value and up to 160 acres of real estate, including your house or mobile home, from being sold to pay off creditors. All your debts, including your personal business debts, will be wiped out if your Chapter 7 bankruptcy petition is successful. Only people who pass the "means test," however, are eligible for Chapter 7 bankruptcy.
If your business is an LLC, corporation or other entity, it may also file for Chapter 7 bankruptcy. This assures creditors that an impartial Chapter 7 Trustee has liquidated the business’s asset and made a fair distribution to creditors so that creditors will lose their reason to continue to sue the business. It also assures a full disclosure of business finances to the Trustee and the Court and assists in giving the owners a fresh start.
Chapter 13 bankruptcies allow you to keep your property in exchange for following a debt repayment plan for three to five years. Chapter 13 is only feasible for somebody with a regular income. If you are a solo business owner, you may not have the income initially to file for Chapter 13 bankruptcy. It can be important to get a job so that you have disposable income before filing for Chapter 13.
Whether you file for Chapter 7 or Chapter 13, an automatic stay will stop your creditors, at least temporarily, from foreclosing on your house or repossessing your personal property. Chapter 13 could be a better option if you have property you need to keep. Chapter 7 bankruptcy will wipe out most unsecured debts, including those associated with your business, such as credit card bills or lawsuit judgments. However, if you pledged your home or other property as collateral for a business loan, the creditor will still be entitled to take the property unless you make provisions to continue paying that particular debt, even if you do file for bankruptcy. Exemptions may allow you to keep the equity in certain possessions.Experienced Attorney Helping Alabama Business Owners in Bankruptcy Matters
If you're about to lose your livelihood, your family home, or other possessions because of a failed business, bankruptcy lawyer Chuck Grainger can help. We can evaluate the facts of your particular situation, tell you whether Chapter 7 or Chapter 13 bankruptcy would help, and discuss other long-term solutions. We serve clients in Montgomery, Prattville, and Troy, among other communities throughout South-Central Alabama. Call us at (334) 260-0500 or contact us through our online form to schedule a consultation.