If you are in a floundering commercial partnership, there may come a time where bankruptcy is the only solution. There are several types of bankruptcies that you can file depending on your situation. This blog post will give an overview of options available for your business.
When should you file for bankruptcy in a partnership?
You should file bankruptcy when you can no longer meet your financial obligations because of a lack of revenue or assets to pay off debt. In this situation, bankruptcy will release you from the debts owed by your business and by you as an individual partner. This option is often called “liquidation,” and is ideal for individuals who have been operating their business for a long time.
Which type of bankruptcy should you consider?
There are several different types of commercial bankruptcies that you can file depending on your situation. For partnerships, a Chapter 11 bankruptcy is a good option. You will have a trustee to oversee your business as it restructures and pays off its debts. It is a good option for businesses that want to stay in operation while they pay back their debts or those who need time before selling assets or going through liquidation.
If your partnership does not meet the requirements of Chapter 11 filing and there is no other option, you can file commercial bankruptcy under Chapter 13. In this type of bankruptcy, perhaps better known as “repayment bankruptcy,” or “wage-earner’s bankruptcy,” you pay back a percentage of your business debts with monthly payments that last three to five years.
How about Chapter 7?
You may consider Chapter 7 bankruptcy if your business has no assets. In this type of filing, your debt is discharged, and you’ll start over with a clean financial slate. A Chapter 7 commercial bankruptcy will negatively impact your credit score for up to 10 years after you file, so it is important to thoroughly consider the pros and cons of each type of filing before making a final decision.