If you are going out of business, owe a significant amount of money to one or many parties, trying to figure out how you will pay your bills and get out of debt can be incredibly stressful. At Royal Legal Solutions, we often field many frustrated questions about how to pay off debt when closing a business. Below are the most common paths owners take to address these financial obligations.
For most businesses, financial obligations are fulfilled when the decision has been made to close in one of three ways.
Often, the path you take to get out of business-related debt is dictated by the type and size of your company. For sole-proprietors, you may be able to utilize the work out method and settle debts yourself after liquidating all assets. However, if you cannot offer creditors enough or a settlement is improbable, bankruptcy is likely the best solution. Sole-proprietors are personally liable for any business debt, which means their homes, vehicles, and personal finances can be garnished in a lawsuit from a creditor. By filing either a Chapter 7 or Chapter 13 bankruptcy claim, sole-proprietors can prevent this. Partnerships are also personally liable for business debts. For these, a personal Chapter 7 bankruptcy claim or hiring a professional is the most advisable option. For most corporations or limited liability companies (LLCs), owners typically are not personally liable for business debt. If your business cannot afford to pay or settle with creditors, a business Chapter 7 bankruptcy or professional may be the right choice. However, if you personally assured a business debt and cannot pay it, you may need to file for a personal Chapter 7 bankruptcy claim as well.
The professionals at Royal Legal Solutions are here for you. If you would like to set up a consultation, whether it is to just go over options for a work out solution or you want to discuss bankruptcy claims, we are standing by.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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