When a small business owner falls into financial turmoil, the matter can quickly escalate. For many in Arkansas, personal and business finances have become so entangled that problems in one realm can quickly lead to problems in the other. When it becomes clear that the business cannot survive, Chapter 7 bankruptcy offers a means of eliminating both personal and business debt.
Before seeking bankruptcy protection, most business owners will go to great lengths to try to bolster their business. Often, this means using personal funds to try to make ends meet or taking out personal loans and calling in various favors. If the business ultimately fails, the owner is faced with not only the loss of the business but also a number of personal financial repercussions.
Because a sole proprietor is the only owner and operator of a business, it is possible to include both business and personal debt in the same bankruptcy case. This can be of great help to the owner, as opposed to having to complete two separate filings with different sets of rules. In most cases, any assets held by the business will need to be sold in order to pay back creditors. That said, the details are different for each filer, and it is impossible to accurately predict the outcome of any bankruptcy without having all of the information.
Arkansas business owners should take the time to review all of their options before seeking bankruptcy protection. For many, a Chapter 7 bankruptcy that combines both business and personal debt is a solid move. Bankruptcy law recognizes the degree of overlap that a sole proprietor has between his or her personal and business expenses, which is a good thing for owners who encounter financial difficulties.
Source: business2community.com, “4 Options You Should Know When Your Small Business Fails“, Dec. 3, 2015