If you’re a business owner in New Jersey and face financial difficulties, bankruptcy can help you regain control. But how does bankruptcy work if you own a business? This article will guide you through the process and explain your available options.
What are your options if you own a business?
In New Jersey, business owners have several bankruptcy options. The path you choose depends on your business type, whether it’s a sole proprietorship, partnership, or corporation. For sole proprietors, personal and business debts are intertwined, so you would file personal bankruptcy to address both. In contrast, partnerships and corporations can file separately from their owners, but personal liability may still apply.
Chapter 7 and Chapter 13 for business owners
Business owners in New Jersey most commonly choose Chapter 7 or Chapter 13 bankruptcy. Chapter 7 is a liquidation process where you sell business assets to pay creditors. However, if you have personally guaranteed any business debts, your personal assets might be at risk.
Chapter 13, however, provides reorganization. It allows you to keep your business running while you develop a plan to repay creditors over time. This option may be better if you want to preserve your business and work through your debts gradually.
Impact on your personal finances
Even if your business files for bankruptcy, it can still affect your personal finances. If you personally guaranteed any business debts, you may be liable for those debts, and they could discharge through your personal bankruptcy case. You need to understand the full impact a business bankruptcy might have on your financial future.
Bankruptcy isn’t a decision to take lightly, especially if you’re a business owner. But with the right information, you can decide whether bankruptcy is the right solution for your situation.